The real impact of a one-off fiscal restriction: empirical evidence of a flypaper effect in Flemish municipalities

Abstract

This paper analyses the effects of a one-off fiscal restriction on Flemish local government spending. The authors provide evidence of a ‘flypaper effect’: fiscal restriction stimulated the sensitivity of local spending to grants. This means that higher-level governments (regional/national/supranational) need to take a flypaper effect into account when considering one-off fiscal restrictions on lower-level governments.

Keywords:

• Fiscal restriction
• Flemish local government
• flypaper effect
• panel data

Acknowledgements

We thank the Agency for Home Affairs of the Flemish government and the Belgian Federal Public Service Economy for sharing their dataset. We gratefully acknowledge the financial support of Ghent University’s Faculty of Economics and Business Administration. Finally, we thank the participants of the 9th Transatlantic Dialogue (Baltimore, June 2013) for helpful and constructive comments on an early version of this paper.

Additional information

Notes on contributors

Stijn Goeminne

Stijn Goeminne is an Assistant Professor in the Faculty of Economics and Business Administration, Ghent University, Belgium.

Carine Smolders

Carine Smolders is a Professor in the Faculty of Economics and Business Administration, Ghent University, Belgium.

Elke Vandorpe

Elke Vandorpe is a Research Assistant in the Faculty of Economics and Business Administration, Ghent University, Belgium.