Pressure Groups and Public Expenditures: The Flypaper Effect Reconsidered

A model of government budgeting is developed in which lobbying by interest groups can divert the allocation of funds away from the one preferred by the median voter. The model is applied to state and local governments to show that the “flypaper effect”–the tendency for lump‐sum grants to increase public expenditures by more than an equivalent increase in the community's pretax income–can be explained without the customary assumption of voter fiscal illusion. Furthermore, the model predicts variation in the extent of the flypaper effect among expenditure categories, as found in previous empirical studies.