Time-series properties of state-level public expenditure
Public expenditure reform must be underpinned by some understanding of the time-series properties of public expenditure. This paper examines the univariate properties of aggregate revenue expenditure at the level of State governments in India over the period 1974-98 for three states: Punjab, Haryana and Maharashtra. The empirical exercise is performed on the logarithmic transformation of aggregate revenue expenditure in terms of nominal (rather than ex post real) expenditure, not normalised to State Domestic Product, for reasons justified in the paper, and is confined to the aggregate for lack of a breakdown of the series by economic classification. The data are adjusted for notional entries and other distortionary budgetary practices. There is trend stationarity in Punjab and Haryana, with a deterministic trend growth rate of 16-17 per cent, and clear evidence thereby of fiscal smoothing in the presence of periodic upward shocks of Pay Commission or other origin. In Maharashtra by contrast, aggregate expenditure carries a unit root, with no deterministic trend, and no drift term; expenditure shocks of other than Pay Commission origin appear to have been enabled with no corresponding smoothing, but there is sharp and concurrent smoothing at the time of the Pay Commission shocks, such that aggregate expenditure does not show a spike. The issue of whether the fiscal smoothing in each case was unproductive or productive remains unrevealed in the aggregate figures.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Murthy, N R Vasudeva, 1993. "Further Evidence of Wagner's Law for Mexico: An Application of Cointegration Analysis," Public Finance = Finances publiques, , vol. 48(1), pages 92-96.
- Ashworth, John, 1995. "The Empirical Relationship between Budgetary Deficits and Government Expenditure Growth: An Examination Using Cointegration," Public Finance = Finances publiques, , vol. 50(1), pages 1-18.
- M. I. Ansari & D. V. Gordon & C. Akuamoah, 1997. "Keynes versus Wagner: public expenditure and national income for three African countries," Applied Economics, Taylor & Francis Journals, vol. 29(4), pages 543-550.
- Bohl, Martin T, 1996. "Some International Evidence on Wagner's Law," Public Finance = Finances publiques, , vol. 51(2), pages 185-200.
- Oxley, Les, 1994. "Cointegration, Causality and Wagner's Law: A Test for Britain 1870-1913," Scottish Journal of Political Economy, Scottish Economic Society, vol. 41(3), pages 286-98, August.
- Michael Chletsos & Christos Kollias, 1997. "Testing Wagner's law using disaggregated public expenditure data in the case of Greece: 1958-93," Applied Economics, Taylor & Francis Journals, vol. 29(3), pages 371-377.
When requesting a correction, please mention this item's handle: RePEc:npf:wpaper:02/4. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (S.Siva Chidambaram)
If references are entirely missing, you can add them using this form.