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The political determinants of fiscal policies in the states of India: An empirical investigation

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  • Kausik Chaudhuri
  • Sugato Dasgupta

Abstract

Using data from the 14 major states of India, we investigate whether state governments' fiscal policy choices are tempered by political considerations. Our principal findings are twofold. First, we show that certain fiscal policies experience electoral cycles: state governments raise less commodity tax revenue, spend less on the current account, and incur larger capital account developmental expenditures in election years than in all other years. Second, we show that coalition state governments raise less own non-tax revenues and spend less on the current account than state governments that are more cohesive in composition. In sum, the dispersion of political power affects government size.

Suggested Citation

  • Kausik Chaudhuri & Sugato Dasgupta, 2006. "The political determinants of fiscal policies in the states of India: An empirical investigation," Journal of Development Studies, Taylor & Francis Journals, vol. 42(4), pages 640-661.
  • Handle: RePEc:taf:jdevst:v:42:y:2006:i:4:p:640-661
    DOI: 10.1080/00220380600682116
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    Cited by:

    1. Mohanty, Biswajit & Bhanumurthy, N. R. & Dastidar, Ananya Ghosh, 2017. "What explains Regional Imbalances in Infrastructure?: Evidence from Indian States," Working Papers 17/197, National Institute of Public Finance and Policy.
    2. Samir Ul Hassan & Biswhambhara Mishra, 2017. "Economic and Political determinants of government expenditure in the state of Jammu and Kashmir (India): A multivariate co-integration analysis," 2017 Papers pha1196, Job Market Papers.
    3. Bharatee Dash & Angara Raja, 2013. "Do political determinants affect the size and composition of public expenditure? A study of the Indian states," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 60(3), pages 293-317, September.
    4. Parag, Waknis, 2012. "Political economy of sub-national spending in India," MPRA Paper 36813, University Library of Munich, Germany.
    5. repec:unt:jnapdj:v:24:y:2017:i:2:p:113-139 is not listed on IDEAS
    6. Bharatee Dash & Angara Raja, 2014. "Do political determinants affect revenue collection? Evidence from the Indian states," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 61(3), pages 253-278, September.
    7. J. Stephen Ferris & Bharatee B. Dash, 2016. "Expenditure Visibility and Voter Memory: A Compositional Approach to the Political Budget Cycle in Indian States, 1959 – 2012," Carleton Economic Papers 16-14, Carleton University, Department of Economics.

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