Grant municipality increase level of public spending more than income of equivalent size
Not to be confused with Flypaper theory (economics).
The flypaper effect is a concept from the field of public finance that suggests that a government grant to a recipient municipality increases the level of local public spending more than an increase in local income of an equivalent size.[1] When a dollar of exogenous grants to a community leads to significantly greater public spending than an equivalent dollar of citizen income: money sticks where it hits, like a fly to flypaper.[2] Grants to the government will stay in the hands of the government and income to individuals will stay with these individuals.
^Alexander Kalb (March 2010), "The impact of intergovernmental grants on cost efficiency: theory and evidence from German municipalities", Economic Analysis & Policy, 40 (1)
^Robert P. Inman (December 2008), "The Flypaper Effect", NBER Working Paper Series (14579)
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