O efeito flypaper nas transferências para os municípios portugueses

Abstract

Unlike theoretical predictions, empirical research shows that an increase in lump-sum intergovernmental grants has a stronger effect on local public expenditure than an equivalent increase of the community disposable income. This phenomenon is known as the flypaper effect and has been subject to several studies abroad. In this model we analyse the flypaper effect for Portuguese municipalities. In the specification of the model we consider two approaches. In a first approach intergovernmental transfers are treated as an exogenous variable. In a second approach intergovernmental transfers are treated as an endogenous variable. The results, based on data of 308 Portuguese municipalities in 2001, provide empirical support to the flypaper effect hypothesis and confirm its sensibility to the econometric specification of intergovernmental transfers.