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

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Listed:
  • Arulampalam, Wiji

    (University of Warwick)

  • Dasgupta, Sugato

    (Jawaharlal Nehru University)

  • Dhillon, Amrita

    (King's College London)

  • 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.

Suggested Citation

  • Arulampalam, Wiji & Dasgupta, Sugato & Dhillon, Amrita & Dutta, Bhaskar, 2008. "Electoral Goals and Center-State Transfers: A Theoretical Model and Empirical Evidence from India," IZA Discussion Papers 3376, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp3376
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    References listed on IDEAS

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    1. 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.
    2. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
    3. Arulampalam, Wiji & Dasgupta, Sugato & Dhillon, Amrita & Dutta, Bhaskar, 2009. "Electoral goals and center-state transfers: A theoretical model and empirical evidence from India," Journal of Development Economics, Elsevier, vol. 88(1), pages 103-119, January.
    4. Dixit, Avinash & Londregan, John, 1998. "Fiscal federalism and redistributive politics," Journal of Public Economics, Elsevier, vol. 68(2), pages 153-180, May.
    5. Johansson, E., 1999. "Intergovernmental Grants As A Tactical Instrument: Some Empirical Evidence from Swedish Municipalities," Papers 1999:10, Uppsala - Working Paper Series.
    6. Case, Anne, 2001. "Election goals and income redistribution: Recent evidence from Albania," European Economic Review, Elsevier, vol. 45(3), pages 405-423, March.
    7. Levitt, Steven D & Snyder, James M, Jr, 1997. "The Impact of Federal Spending on House Election Outcomes," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 30-53, February.
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    More about this item

    Keywords

    swing; alignment; redistributive politics; electoral competition;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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