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15 de septiembre 2015
The Flypaper Effect is not a Puzzle

This note provides, in the context of an example, a new theoretical explanation of the flypaper effect by incorporating dynamic stochastic features into the conventional framework of local public finances. Under these circumstances, the flypaper effect is not an anomaly, but a natural optimizing behavior within the “traditional theory of grants-in-aid”. When shocks to intergovernmental […]