The “Flypaper Effect” Is Not an Anomaly

Abstract

The empirical nonequivalence between grants by a central government and increases in community income (the “flypaper effect”) has been considered anomalous. But the “anomaly” label is naïve: in a multiconsumer community, equivalence demands an unlikely match of tax rules and income‐growth patterns.We go beyond the single‐policy‐variable, median‐voter model and apply Roemer’s concept of Party Unanimity Nash Equilibrium, which allows for party competition in multidimensional policy spaces. We compute the equilibria for a model with two independent policy variables (intercept and slope of an affine tax schedule) and obtain numerical values that agree with the empirical literature.