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Electoral Goals and Center-State Transfers: A Theoretical Model and Empirical Evidence from India

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Author Info

  • Arulampalam, Wiji

    ()
    (University of Warwick)

  • Dasgupta, Sugato

    ()
    (Jawaharlal Nehru University)

  • Dhillon, Amrita

    ()
    (University of Warwick)

  • Dutta, Bhaskar

    ()
    (University of Warwick)

Abstract

We construct a model of redistributive politics where the central government is opportunistic and uses its discretion to make transfers to state governments on the basis of political considerations. These considerations are the alignment between the incumbent parties at the central and state levels and whether a state is a swing state or not. A testable prediction from the model is that a state that is both swing and aligned with the central government is especially likely to receive higher transfers. We test this prediction using Indian data for 14 states from 1974-75 to 1996-97. We find that a state which is both aligned and swing in the last state election is estimated to receive 16% higher transfers than a state which is unaligned and non-swing.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3376.

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Length: 37 pages
Date of creation: Feb 2008
Date of revision:
Publication status: published in: Journal of Development Economics, 2009, 88 (1), 103 - 119
Handle: RePEc:iza:izadps:dp3376

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Keywords: swing; alignment; redistributive politics; electoral competition;

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  1. Johansson, Eva, 1999. "Intergovernmental Grants as a Tactical Instrument: Some Empirical Evidence from Swedish Municipalities," Working Paper Series 1999:10, Uppsala University, Department of Economics.
  2. Steven D. Levitt & James M. Snyder, Jr., 1995. "The Impact of Federal Spending on House Election Outcomes," NBER Working Papers 5002, National Bureau of Economic Research, Inc.
  3. Case, A, 1996. "Election Goals and Income Redistribution : Recent Evidence from Albania," Papers 177, Princeton, Woodrow Wilson School - Public and International Affairs.
  4. Wiji Arulampalam & Sugato Dasgupta & Amrita Dhillon & Bhaskar Dutta, 2008. "Electoral goals and center-state transfers: A Theoretical model and empirical evidence from India," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 08-14, Indian Statistical Institute, New Delhi, India.
  5. Dixit, Avinash & Londregan, John, 1998. "Fiscal federalism and redistributive politics," Journal of Public Economics, Elsevier, vol. 68(2), pages 153-180, May.
  6. Snyder, James M, 1989. "Election Goals and the Allocation of Campaign Resources," Econometrica, Econometric Society, vol. 57(3), pages 637-60, May.
  7. Khemani, Stuti, 2007. "Does delegation of fiscal policy to an independent agency make a difference? Evidence from intergovernmental transfers in India," Journal of Development Economics, Elsevier, vol. 82(2), pages 464-484, March.
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