Unsticking the flypaper effect in an uncertain world

• 成果类型: Article
• 署名作者: Vegh, Carlos A.; Vuletin, Guillermo
• 署名单位: Johns Hopkins University; National Bureau of Economic Research; Brookings Institution
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2015.09.001
• 发表日期: 2015
• 页码: 142-155
• 关键词: flypaper effect; uncertainty; portfolio theory; insurance; precautionary saving; incomplete markets

摘要

We provide a novel explanation for the flypaper effect based on insurance arguments. In our model, the flypaper effect arises due to the differential response of precautionary savings to private income or fiscal transfers shocks in an uncertain world with incomplete markets. The model generates two testable implications: (i) the flypaper effect is a decreasing function of the correlation between fiscal transfers and private income, and (ii) such relationship is stronger the higher is the volatility of fiscal transfers and/or private income. An empirical analysis of Argentinean provinces for the period 1963-2006 finds strong support for the model's implications. (C) 2015 Elsevier B.V. All rights reserved.