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Impact of Transfers on Elementary Education Expenditure and Measuring Equalization Transfers to Indian States

Author

Listed:
  • Jyotsna Rosario

    (UGC Senior Research Fellow at Madras School of Economics, Gandhi Mandapam Road, Kotturpuram, Chennai - 600025, India)

  • K. R. Shanmugam

    ((Corresponding Author)Director and Professor, Madras School of Economics)

Abstract

This study examines the impact of Central transfers on elementary education expenditure and determines fiscal equalization transfers using the data for 28 Indian States from 2009-10 to 2020-21, the Australia’s expenditure equalization framework and the static panel data methodology. Based on the estimated values from the expenditure model and two benchmarks: all States’ average and top three States’ average per student expenditure on elementary education, it computes the State specific finance gap and total transfers needs. Results indicate that States with larger fiscal capacity tend to spend more on elementary education and the existing transfers mechanism has failed to compensate the lagging States. Bihar, West Bengal, Uttar Pradesh, and Madhya Pradesh have a large expenditure gap. Given the magnitude of the Centre's budget, the estimated additional transfers seem to be feasible. The findings of the study will be useful for policymakers and researchers to create appropriate strategies and design equalization transfers that can enable all Indian Sates to provide a standard level of elementary education.

Suggested Citation

  • Jyotsna Rosario & K. R. Shanmugam, 2023. "Impact of Transfers on Elementary Education Expenditure and Measuring Equalization Transfers to Indian States," Working Papers 2023-241, Madras School of Economics,Chennai,India.
    • Handle: RePEc:mad:wpaper:2023-241
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal equalization; Australian transfer mechanism; elementary education; public education expenditure; Indian States; panel data;
    All these keywords.

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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