We test the hypothesis that the flypaper effect can arise if the recipient government finances part of its expenditures with a distortionary tax. We present a simple theoretical framework that shows how a lump-sum transfer stimulates the marginal expenditures of a recipient government through an...

Proponents focus on the average fiscal cost of program spending when the interest rate on government debt is less than the economy's growth rate. They ignore the potentially large marginal fiscal cost of deficit-financed increases in spending that arise when a higher public debt increases...

This paper empirically investigates the underlying determinants of expenditure decentral- ization, based on the predictions of a new political economy model of partial decentralization. The analysis is based on an agency model, in which two levels of government are involved in the provision of a...

Fiscal decentralization is high on the agenda in policy fora. This paper empirically investigates the underlying causes of fiscal decentralization, based on the predictions of a simple political economy model. We argue that the likeliness that a central government engages in devolution of powers...