Electoral competition and the flypaper effect in Mexican local governments

Abstract

In this paper, we present evidence of the flypaper effect of unconditional grants in the Mexican municipalities during the 1990 to 2007 period. Using panel data, we confirm the fiscal replacement asymmetric behavior in different types of expenditures. That is, local governments respond differently when transfers increase than when they decrease. We argue that the response in public expenditure, due to changes in unconditional transfers, is also determined by the increasing electoral competition in the state and municipal levels of government, especially during electoral years.

En este trabajo se muestra que el efecto "flypaper" ha estado presente en las transferencias no condicionadas que han recibido los municipios en México durante el periodo de 1990 a 2007. Utilizando datos tipo panel, confirmamos que hay una sustitución fiscal de tipo asimétrico en varios tipos de gasto público. Sostenemos que la respuesta del gasto público municipal también está determinada por el aumento en la competencia electoral a nivel estatal y municipal, especialmente durante los años electorales.