Orkhan ISMAYILOV
Department of Public Administration, University of North Texas, (940) 565- 2165 Orkhan.Ismayilov@unt.eduAbstract
The flypaper effect is a concept most commonly used by economists to study effect of funding by the federal government on state and local government finance. The argument is that funds allocated by a larger institution to smaller institutions changes policies and revenue base of fund receiving institutions. Similar concept is used to study the effect of government grants on nonprofit finance. The argument is that grant money pushes aside private donations that nonprofit organizations receive. However, the literature on the flypaper effect on grant money varies based on disciplines. The literature on the flypaper effect comes from three main disciplines, such as Economics, Business, and Public Administration. Additionally, the literature also highlights that grant money creates crowding in and out effects. The purpose of this paper is analyze and highlight the literature from three main disciplines, and discuss advantages and disadvantages of crowding in and out effects of grant funding. Findings indicate that grants have an effect on organizational revenue, policies, mission, public support, and service effectiveness.
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