The Flypaper Effect: “Reality” or “Myth”? Evidence from Turkey

Abstract

Several empirical observations in the local government economics literature point out that the effect of an increase in intergovernmental transfers on local public expenditures is more than that of increased personal income. This situation is called the “flypaper effect.” This study aims to reveal the relevant literature and to test the flypaper effect for Turkey. In this context, using panel data techniques, the flypaper effect is evidenced at the provincial level in Turkey from 2008-2017. At the same time, our findings indicate that grants have a stimulatory effect in Turkey.