Flypaper effect incorporating spatial interdependence

Abstract

This paper examines the decentralization process in the state of Maharashtra. Among the states in India, Maharashtra's efforts at decentralization are regarded as a success story. Using cross-section data for 243 urban local governments, the paper examines the flypaper effect, that is, the expenditure stimulus of grants from the state government to the urban governments. The significance of spatial factors has been highlighted in the study. The models have been estimated using spatial econometric techniques. Most of the estimated models show the presence of the flypaper effect. © The Applied Regional Science Conference (ARSC)/Blackwell Publishing Asia Pty Ltd. 2009.