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Political budget cycles in federal systems: The case of India

Author

Listed:
  • Sourav Das

    (University of Kassel)

  • Patrick Hufschmidt

    (Technical University of Dortmund)

  • Fabian Mankat

    (University of Kassel)

  • Konstantinos Theocharopoulos

    (University of Siegen)

Abstract

This paper examines Political Budget Cycles in federal systems, focusing on how a central incumbent allocates discretionary transfers across states in response to electoral incentives. We develop a theoretical model predicting that average discretionary transfers increase during federal election periods. While swing states consistently receive higher discretionary transfers due to their electoral competitiveness, the election-period increase is larger for non-swing states. Using a panel dataset of Indian states from 2006 to 2022, we find evidence consistent with the theoretical model: discretionary transfers are significantly higher in federal election periods, swing states receive more discretionary transfers in non-election periods, and the election-period increase in discretionary transfers is more pronounced for non-swing states.

Suggested Citation

  • Sourav Das & Patrick Hufschmidt & Fabian Mankat & Konstantinos Theocharopoulos, 2025. "Political budget cycles in federal systems: The case of India," MAGKS Papers on Economics 202518, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:202518
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    File URL: https://www.uni-marburg.de/en/fb02/research-groups/economics/macroeconomics/research/magks-joint-discussion-papers-in-economics/papers/2025-papers/18-2025.pdf
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    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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