Author(s)

Lyoe Lee, Guillermo Vuletin

Colby College, Waterville, USA.

In this paper, we analyze how public spending responds to income and intergovernmental fiscal transfer shocks in China. Similar to federations around the world, we find the flypaper effect at the provincial level since the country became a de facto federation in 1980. Before 1980 we find what we define as the teflon effect at the central government level. We rationalize the latter regularity using collection costs/distortionary taxation arguments

Flypaper Effect; Teflon Effect; Fiscal Federalism; Fiscal Reform; China

L. Lee and G. Vuletin, "The Flypaper and Teflon Effects: Evidence from China," Modern Economy, Vol. 3 No. 7, 2012, pp. 811-816. doi: 10.4236/me.2012.37103.