Asimetri pada Flypaper Effect: Bukti Empiris Pemanfaatan Dana Alokasi Umum pada Pemerintah Daerah di Indonesia

The main objective of this research is to provide empirical proof of occurrence of asymmetries in the flypaper effect for the Indonesian Municipalities. The flypaper effect, when an unconditional lump-sum grant to a municipal government increases spending in a greater proportion than an equivalent raise in municipal revenue. Using a panel of data on Indonesian municipalities covering the period 2000-2010, we also clear evidence of there is asymmetrical reactions. More precisely, the results suggest the presence of a fiscal replacement type of asymmetry: when grants grow, municipalities spend most of the additional revenue. Furthermore, when grants fall, spending is unaffected and municipalities compensate the loss through additional taxation.