वित्त मंत्रालय के तहत एक स्वायत्त अनुसंधान संस्थान

 

Federalism, fiscal asymmetries and economic convergence: evidence from Indian States

Publication date

मई, 2018

Details

Special Issue of "Economic Analysis of Law, Politics and Regions" of Asia-Pacific Journal of Regional Science (Springer).

Authors

Lekha Chakraborty and Pinaki Chakraborty

Abstract

This paper tests economic convergence across States in India by incorporating federal fiscal asymmetries and differentials in gross fixed capital formation at the state level. Using dynamic panel models, it is observed that there is no unconditional convergence of economic growth. Controlling for state-wise asymmetries in fiscal policy variables, financial parameters, capital formation and human development outcomes using Arellano and Bond (JAMA 58: 277–297, 1991) panel data methodology, no strong evidence for conditional convergence is observed. It is observed from the GMM estimations that public capital spending has positive and significant relationship with economic growth. It is also observed that the quality of human capital formation is a pre-requisite for economic growth, both for club and (aggregate) conditional convergence.
 
Keywords: Economic convergence · Asymmetric federalism · Dynamic panel estimation · GMM · Fiscal policy
JEL Classification: C33 · E62 · H77 · R11 · R58
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