01837cas a2200241 a 4500 AALejournalIMF010073 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451966367 1018-5941 BD-DhAAL BD-DhAAL International Monetary Fund. Unfolding the Flypaper : The Effects of Intergovernmental Grants in an Open Local Economy. Washington, D.C. : International Monetary Fund, 1989. 1 online resource (22 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Empirical studies of the effects of intergovernmental grants to localities do not support standard microeconomic predictions. Block grants have surprisingly large positive effects on public expenditures. Researchers have attributed this 'flypaper effect' to imperfect information (fiscal illusion), bureaucratic self-interest (Leviathan motives), and flawed econometrics. In this paper, a three-sector, computable general equilibrium model of a local economy is used to explore the effects of block grants and matching grants. The paper demonstrates that without fiscal illusion or unresponsive bureaucrats, these grants can have large spending consequences. Fiscal adjustments, mobility, and capitalization effects explain the leveraged impact of intergovernmental grants. Mode of access: Internet IMF Working Papers; Working Paper ; No. 1989/058 Full text available on IMF http://elibrary.imf.org/view/journals/001/1989/058/001.1989.issue-058-en.xml IMF e-Library