The Flypaper and Teflon Effects: Evidence from China

Lyoe Lee, Guillermo Vuletin

Colby College, Waterville, USA.

DOI: 10.4236/me.2012.37103                

Abstract

In this paper, we analyze how public spending responds to income and intergovernmental fiscal transfer shocks in China. Similar to federations around the world, we find the flypaper effect at the provincial level since the country became a de facto federation in 1980. Before 1980 we find what we define as the teflon effect at the central government level. We rationalize the latter regularity using collection costs/distortionary taxation arguments

Keywords

Flypaper Effect; Teflon Effect; Fiscal Federalism; Fiscal Reform; China

Conflicts of Interest

The authors declare no conflicts of interest.

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