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The Flypaper Effect in Germany: An East-West Comparison

We investigate the effect of general-purpose transfers on different expenditure categories and tax rates in the municipalities of Saxony (eastern Germany) and North Rhine-Westphalia (western Germany). Findings from the panel data analysis suggest the existence of the “flypaper effect” – municipalities use transfers to increase expenditures but do not reduce taxes. For most expenditure subcategories the estimated coefficients are alike, suggesting similarity of spending priorities in the two federal states despite the differences in the transfer dependency. Targeted support of eastern municipalities could potentially explain few identified differences in the spending behavior.

Identiferoai:union.ndltd.org:DRESDEN/oai:qucosa.de:bsz:14-qucosa-213629
Date15 November 2016
CreatorsKorzhenevych, Artem, Langer, Sebastian
ContributorsTechnische Universität Dresden, Faculty of Business and Economics
PublisherSaechsische Landesbibliothek- Staats- und Universitaetsbibliothek Dresden
Source SetsHochschulschriftenserver (HSSS) der SLUB Dresden
LanguageEnglish
Detected LanguageEnglish
Typedoc-type:workingPaper
Formatapplication/pdf
Relationdcterms:isPartOf:CEPIE Working Paper ; 10/16

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