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Political strongholds and budget allocation for developmental expenditure: Evidence from Indian states, 1971-2005

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  • Kaushik, Arun

    (Indira Gandhi Institute of Development Research)

  • Rupayan Pal

    (Indira Gandhi Institute of Development ResearchInstitute of Economic Growth)

Abstract

This paper examines the effects of political factors on allocation of revenue budget for developmental expenditure by the sub-national governments, using data from 15 major states in India during the period 1971-2005. It measures the ruling party's political stronghold on the basis of constituency level electoral outcomes and shows that greater stronghold of the ruling party in a state leads to significantly higher proportion of revenue budget allocated for developmental expenditure. It also shows that voters' turnout and political regime change have positive and significant effect on proportion of revenue budget allocated for developmental expenditure. However, political ideology, within government fragmentation, disproportionality in representation, and effective number of political parties do not have any significant impact on budget allocation decisions of the Indian state governments. Results of this paper also indicate that greater reliance on market forces reduces the share of developmental expenditure. These are new and robust results.

Suggested Citation

  • Kaushik, Arun & Rupayan Pal, 2012. "Political strongholds and budget allocation for developmental expenditure: Evidence from Indian states, 1971-2005," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-015, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2012-015
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    File URL: http://www.igidr.ac.in/pdf/publication/WP-2012-015.pdf
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    References listed on IDEAS

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    Cited by:

    1. Sandhya Garg, 2015. "Spatial convergence in public expenditure across Indian states: Implication of federal transfers," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2015-028, Indira Gandhi Institute of Development Research, Mumbai, India.
    2. Garg, Sandya & Ashima Goyal & Rupayan Pal, 2014. "Why tax effort falls short of capacity in Indian states: A Stochastic frontier approach," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-032, Indira Gandhi Institute of Development Research, Mumbai, India.

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    More about this item

    Keywords

    Political stronghold; budget allocation; developmental expenditure; state government; ruling party; political factors; India;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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