What shapes the flypaper effect? The role of the political environment in the budget process

This study investigates the spatial heterogeneity of the flypaper effect in a sample of 2,451 Spanish municipalities over the period 2003-2015 by means of Bayesian spatial panel data econometric techniques including municipal and time-period fixed effects. In particular, we analyse how differences in the degree of political competition and the local governments' monitoring and enforcement effort in tax collection affect the size of the flypaper effect. Our results suggest that municipalities with higher tax collection efficiency and where local governments have more political strength exhibit a lower flypaper effect.