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Mental Accounting in Local Public Sector Budgeting: An Empirical Analysis for the Flemish Municipalities

Author

Listed:
  • Bruno Heyndels

    (Free University Brussels)

  • Frank Van Driessche

    (Free University Brussels)

Abstract

Flemish municipalities collect revenue from different sources. The mental accounting framework suggests that the source of revenue affects the manner in which it is spent. We present an empirical test of this. Using a panel of 308 observations over the period 1989-1996 we analyze the responses of Flemish municipalities non-debt expenditures to changes in unconditional grants, tax revenues, and debt payments. Our results reveal the presence of significant flypaper effects in the case of grants and taxes, but not for debt.

Suggested Citation

  • Bruno Heyndels & Frank Van Driessche, 1998. "Mental Accounting in Local Public Sector Budgeting: An Empirical Analysis for the Flemish Municipalities," Eastern Economic Journal, Eastern Economic Association, vol. 24(4), pages 381-394, Fall.
    • Handle: RePEc:eej:eeconj:v:24:y:1998:i:4:p:381-394
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/eeconj/Volume24/V24N4P381_394.pdf
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    Citations

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    Cited by:

    1. Santiago Lago-Peñas, 2008. "Local Governments' Asymmetric Reactions to Grants," Public Finance Review, , vol. 36(2), pages 219-242, March.
    2. John Yinger & Phuong Nguyen-Hoang, 2015. "The Behavioral Impacts of Poverty Tax Relief: Salience or Framing?," Center for Policy Research Working Papers 186, Center for Policy Research, Maxwell School, Syracuse University.
    3. Becker, Johannes & Hopp, Daniel & Kriebel, Michael, 2020. "Mental accounting of public funds – The flypaper effect in the lab," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 321-336.

    More about this item

    Keywords

    Municipalities; Revenue; Tax;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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