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Federal Politics and Budget Deficits : Evidence from the States of India

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dc.contributor.authorKhemani, Stuti
dc.date.accessioned2014-08-01T21:28:16Z
dc.date.available2014-08-01T21:28:16Z
dc.date.issued2002-10
dc.description.abstractThis paper tests two predictions implied by models of the common-pool game in federations where subnational governments are more likely to have higher deficits because they do not internalize the macroeconomic effects of fiscal profligacy. The first is that subnational governments that belong to the same political party as the central government have lower spending and deficits because they are more likely to be influenced to internalize the macroeconomic effects of additional local spending; and the second is that subnational governments that are more dependent on intergovernmental transfers have higher spending and deficits. We find that in 15 major states of India over the period 1972-1995, states in fact have substantially higher spending and deficits (higher by about 10 percent of the sample average) when their government belongs to the same party as that governing at the center; and that intergovernmental grants tend to have a counter-intuitive negative effect on spending and deficits. The additional deficit of affiliated states is financed almost entirely by additional loans from the central government (as opposed to the market) leading to our interpretation that similar political considerations influence the distribution of deficits across states as they do other intergovernmental grants. We argue that the evidence from India, contrasted with broader international evidence, indicates that the effect of fiscal institutions in a federation is sensitive to underlying political incentives. This underscores the overall importance of political institutions in determining the consolidated government deficit, relative to specific rules of intergovernmental transfers.en
dc.identifierhttp://documents.worldbank.org/curated/en/2002/10/2874487/federal-politics-budget-deficits-evidence-states-india
dc.identifier.doi10.1596/1813-9450-2915
dc.identifier.urihttps://hdl.handle.net/10986/19248
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 2915
dc.rightsCC BY 3.0 IGO
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectBORROWING
dc.subjectBUDGET DEFICITS
dc.subjectBUDGETARY INSTITUTIONS
dc.subjectCABINET OF MINISTERS
dc.subjectCENTRAL GOVERNMENT
dc.subjectCENTRAL GOVERNMENTS
dc.subjectCENTRAL TRANSFERS
dc.subjectCOALITIONS
dc.subjectCONSERVATISM
dc.subjectCONSTITUENCIES
dc.subjectCONSTITUENCY
dc.subjectCONSTITUTION
dc.subjectDEBT
dc.subjectDECENTRALIZATION
dc.subjectDEMOCRACY
dc.subjectDISTRICTS
dc.subjectECONOMIC CONDITIONS
dc.subjectECONOMIC REFORM
dc.subjectECONOMIC SHOCKS
dc.subjectELECTORAL COMPETITION
dc.subjectEXECUTIVE GOVERNMENT
dc.subjectEXPENDITURE
dc.subjectEXPENDITURE RESPONSIBILITIES
dc.subjectEXTERNALITIES
dc.subjectFEDERAL GOVERNMENT
dc.subjectFEDERALISM
dc.subjectFEDERATIONS
dc.subjectFISCAL
dc.subjectFISCAL DECENTRALIZATION
dc.subjectFISCAL DEFICIT
dc.subjectFISCAL DEFICITS
dc.subjectFISCAL DISCIPLINE
dc.subjectFISCAL FEDERALISM
dc.subjectFISCAL POLICIES
dc.subjectFISCAL POLICY
dc.subjectFISCAL PROBLEMS
dc.subjectGOVERNMENT SPENDING
dc.subjectGOVERNMENT'S BUDGET
dc.subjectINSTITUTIONAL ANALYSIS
dc.subjectINSTITUTIONAL RELATIONS
dc.subjectINSURANCE
dc.subjectINTERGOVERNMENTAL TRANSFERS
dc.subjectLEGAL INSTITUTIONS
dc.subjectLEGISLATIVE ASSEMBLIES
dc.subjectLEGISLATURE
dc.subjectLEGISLATURES
dc.subjectLOCAL AUTHORITIES
dc.subjectLOCAL GOVERNMENT
dc.subjectLOCAL GOVERNMENTS
dc.subjectLOCAL SPENDING
dc.subjectLOWER HOUSE
dc.subjectMACROECONOMIC STABILITY
dc.subjectMINISTERS
dc.subjectNATIONAL ELECTIONS
dc.subjectNATIONAL GOVERNMENTS
dc.subjectNATIONAL LEVEL
dc.subjectPARTY AFFILIATION
dc.subjectPOLITICAL CONTROL
dc.subjectPOLITICAL DECENTRALIZATION
dc.subjectPOLITICAL INSTITUTIONS
dc.subjectPROVINCIAL GOVERNMENTS
dc.subjectPUBLIC EXPENDITURES
dc.subjectPUBLIC FINANCE
dc.subjectPUBLIC GOODS
dc.subjectPUBLIC RESOURCES
dc.subjectPUBLIC SPENDING
dc.subjectRESERVE BANK OF INDIA
dc.subjectRESOURCE ALLOCATION
dc.subjectSOFT BUDGET CONSTRAINTS
dc.subjectSTATE FISCAL POLICY
dc.subjectSTATE GOVERNMENT
dc.subjectSTATE INCOME
dc.subjectSUBNATIONAL DEFICITS
dc.subjectSUBNATIONAL GOVERNMENT
dc.subjectSUBNATIONAL GOVERNMENTS
dc.subjectTAX
dc.subjectVOTING
dc.titleFederal Politics and Budget Deficits : Evidence from the States of Indiaen
dspace.entity.typePublication
okr.crossref.titleFederal Politics and Budget Deficits: Evidence from the States of India
okr.date.disclosure2002-10-31
okr.date.doiregistration2025-04-10T11:17:09.609220Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/2002/10/2874487/federal-politics-budget-deficits-evidence-states-india
okr.globalpracticeSocial, Urban, Rural and Resilience
okr.globalpracticeGovernance
okr.globalpracticeFinance and Markets
okr.globalpracticeGovernance
okr.guid111491468771064248
okr.identifier.doi10.1596/1813-9450-2915
okr.identifier.externaldocumentum000265513_20040130114654
okr.identifier.internaldocumentum2874487
okr.identifier.reportWPS2915
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2004/01/30/000265513_20040130114654/Rendered/PDF/wps2915.pdfen
okr.region.administrativeSouth Asia
okr.region.countryIndia
okr.topicBanks and Banking Reform
okr.topicPublic and Municipal Finance
okr.topicGovernance::National Governance
okr.topicPublic Sector Economics and Finance
okr.topicUrban Development::Municipal Financial Management
okr.topicFinance and Financial Sector Development
okr.unitDevelopment Research Group
okr.volume1 of 1
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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