摘要：This paper estimates causal effects of intergovernmental grants on local expenditure and tax revenue. This is done by utilizing a rule-based grant distribution scheme in the Philippines. The results provide evidence of a flypaper effect among both municipalities and cities in the Philippines, i.e., grants create a large stimulative effect on local spending but have no effect on the reduction of local taxation. The result is robust to a noticeable self-selection bias in the Philippine local governance, where a municipality can opt to convert to a city to receive more grants once it meets conversion criteria.
