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Between Election Rivalry and the Agency Costs of Government: The Effectiveness of Party Competition Across Indian States, 1957–2018

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  • J. Stephen Ferris
  • Bharatee Bhusana Dash

Abstract

Two dimensions of the intensity of interparty rivalry are used to test the hypothesis that greater interparty competition enhances government efficiency. Using data from a set of 14 large Indian state governments between 1957 and 2018, we find confirmation for two political rivalry hypotheses. The first is that the ex-post size of the first versus second place seat share winning margin is a useful metric of the (in)effectiveness of rival party policing of incumbent spending behavior. The second is the hypothesis that excessive spending by the incumbent governing party is decreased by the expectation of greater election contestability and that contestability is related to the expected effective number of competing parties ( ENPSeats ) nonmonotonically. Our analysis suggests that contestability across Indian States reaches a maximum when the incumbent faces an expectation of ENPSeats that is closer to 5 than to Duverger's 2.

Suggested Citation

  • J. Stephen Ferris & Bharatee Bhusana Dash, 2024. "Between Election Rivalry and the Agency Costs of Government: The Effectiveness of Party Competition Across Indian States, 1957–2018," Public Finance Review, , vol. 52(3), pages 314-344, May.
    • Handle: RePEc:sae:pubfin:v:52:y:2024:i:3:p:314-344
    DOI: 10.1177/10911421231204651
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    References listed on IDEAS

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    1. Winer,Stanley L. & Ferris,J. Stephen, 2022. "Political Competition and the Study of Public Economics," Cambridge Books, Cambridge University Press, number 9781009001694.
    2. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65(2), pages 135-135.
    3. Bharatee Dash & Angara Raja, 2013. "Do political determinants affect the size and composition of public expenditure? A study of the Indian states," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 60(3), pages 293-317, September.
    4. Kausik Chaudhuri & Sugato Dasgupta, 2006. "The political determinants of fiscal policies in the states of India: An empirical investigation," Journal of Development Studies, Taylor & Francis Journals, vol. 42(4), pages 640-661.
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