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Local public goods in a democracy: Theory and evidence from rural India

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  • Santanu Gupta
  • Raghbendra Jha

Abstract

This paper examines allocation of local public goods over jurisdictions (villages) with individuals with identical tastes and different incomes, in a model with democratic institutions and majority rule. The median voter (in income) in each jurisdiction determines the probability of re-election for the incumbent government. The jurisdiction with the median of these median voters is most favoured. With identical median voters in jurisdictions, and with re-election requiring less than 50mandate, jurisdictions with higher income inequality get favoured. Results from a survey data (from NCAER) on infrastructure provision in 1669 Indian villages confirm this hypothesis. Ethnic fragmentation does not affect public good provision but political fragmentation does. Finally, villages with the median population are the most favoured for public goods allocation. Sparsely populated and too densely populated villages are relatively neglected.

Suggested Citation

  • Santanu Gupta & Raghbendra Jha, 2006. "Local public goods in a democracy: Theory and evidence from rural India," Departmental Working Papers 2006-07, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2006-07
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    References listed on IDEAS

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    More about this item

    Keywords

    median voter; local public good; reservation utility;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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