Flypaper effect

The flypaper effect is the finding that "money sticks where it hits", like flies stick to flypaper. The concept was first described in this metaphorical way by Arthur Okun in response to the research of his colleague, Edward Gramlich, published in 1979 as The Stimulative Effect of Government Grants. In that case, the finding was that a grant from federal government to local government would raise spending of that local government by a greater amount than an equivalent increase in local income. The boost to local income would be captured by the local government because that was where it first arrived and there would not be a fully equivalent reduction in local taxation or borrowing.[1][2][3]

See also

References

  1. ^ Amy Ellen Schwartz (2005), "Flypaper effect", Encyclopedia of taxation and tax policy, p. 152, ISBN 9780877667520 
  2. ^ Courant, Gramlich, Rubinfeld (1979), "The Stimulative Effect of Government Grants", Fiscal Federalism and Grants-in-Aid, https://www.law.berkeley.edu/faculty/rubinfeldd/Profile/publications/stimulative_effects.pdf 
  3. ^ James R. Hines, Richard H. Thaler (1995), "Anomalies: The Flypaper Effect", The Journal of Economic Perspectives 9 (4): 217–226, http://www.jstor.org/stable/2138399