The Flypaper Effect under Different Institutional Contexts: The Colombian Case

An analysis of the flypapereffect under different institutionalcontexts is carried out for Colombia,where during the decentralizationprocess different sub-national fiscalstructures with different degrees ofautonomy to manage transfers,expenditures, taxes and debt havecoexisted. The analysis is carried outby using panel data models andalternative functional forms. Theresults show that the flypaper effectis observed when sub-national entitiesare highly dependent onintergovernmental transfers. Ananalysis of asymmetries in response totransfers shows that sub-nationalauthorities try to cover the reductionin transfers when the percentage oftransfers into the total currentrevenue is high.