Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5054572 | Economic Modelling | 2014 | 7 Pages |
Abstract
The empirical work on local public finance has found that the marginal effect of lump-sum grants on expenditure is larger than that of income, thereby providing evidence of the “flypaper effect”. However, most existing studies only employ single equation models to test the flypaper effect. In this paper, we specify a seemingly unrelated regression (SUR) model to examine the flypaper effect in Japan, primarily because other categories of expenditure influence the expenditure on particular policy objectives. We also include spatial interaction in our estimation model and employ a Bayesian approach in estimating our model. Our results show that SUR with a spatial error model is better for this purpose than several other specifications. Using this approach, we observe evidence of the flypaper effect in land development, police, education, and debt expenditure, and spatial interaction in sanitation, police, education, and disaster recovery expenditure.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Kazuhiko Kakamu, Hideo Yunoue, Takashi Kuramoto,