General revenue sharing and public sector unions

In this paper, I find that in the context of a large intergovernmental general revenue sharing program implemented from 1972 to 1986, cities increased expenditures one-for-one with federal grants, which is suggestive of a large flypaper effect. Furthermore, I find that cities in states with pro-union collective bargaining laws spent more than half of the transfers on increased wages, while cities in states without such laws spent a greater fraction on increased government services. These latter findings suggest that public sector unions play an important role in determining the usage and impact of intergovernmental grants. Published by Elsevier B.V.