The Flypaper Effect Revisited: An Econometric Explanation
The Review of Economics and Statistics
1987
Monte Carlo evidence is presented which supports the conclusion that when a block grants variable in an ordinary least squares (OLS) model is endogenously constructed due to the closed-ended nature of matching aid, estimates of the propensity to spend lump-sum aid are biased upward. The findings suggest that OLS estimates lead to erroneous conclusions regarding the existence of a flypaper effect and support the use of maximum likelihood models in situations where budget constraints are piecewise-linear.
- DOI
- 10.2307/1927243
- Volume
- 69 (2)
- Pages
- 347
- Export
- BibTeX
- Sources
- crossref openalex