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Does Size Matter? The Productivity of Government Expenditures and the Size of States: Evidence from India

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  • Cornelis Haasnoot

Abstract

Some politicians argue for the splitting and combining of states to increase government productivity, but there is a dearth of empirical evidence on the optimal size of a state. Using data from Indian states, I test a model of the optimal size of the state. The paper find that size and preference heterogeneity do not significantly affect the productivity of a state government. However, when states are split up, the productivity of the root state’s government is negatively affected. This suggests that there may be a readjustment phase after state reorganisation that brings about this negative effect. It is important to consider this effect when redrawing state borders.

Suggested Citation

  • Cornelis Haasnoot, 2016. "Does Size Matter? The Productivity of Government Expenditures and the Size of States: Evidence from India," Working Papers id:10759, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:10759
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