Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/148281
Authors: 
Korzhenevych, Artem
Langer, Sebastian
Year of Publication: 
2016
Series/Report no.: 
CEPIE Working Paper No. 10/16
Abstract: 
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.
Subjects: 
Flypaper Effect
Local Government Expenditure
Transfers to Municipalities
Local Taxation
JEL: 
H21
H70
H71
H72
H77
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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