Environmental/Ecological Fiscal Transfers

• Start date अग., 2019
• Completion date अग., 2021
• Sponsor Self-initiated
• Project leader Lekha Chakraborty, Amandeep Kaur, Divy Rangan
• Focus

  Against the backdrop of the Covid-19 pandemic, the paper explores the empirical evidence for flypaper effects in the ecological fiscal space in India. Using the panel data models, we analyse whether the impact of intergovernmental fiscal transfers or state’s own revenue determines the expenditure commitments on ecology at the state level. The econometric analysis shows that the aggregate intergovernmental fiscal transfers rather than state’s own income determines the ecological expenditure at sub-national government levels. The evidence for the efficacy of flypaper effects either stem from bureaucratic fiscal behaviour or the fiscal illusion of the economic agents about the exogeneity of ecological fiscal space. The results hold, when the models are controlled for ecological outcomes and demographic variables. However, at the disaggregated levels of intergovernmental fiscal transfers - grants and tax devolution - the evidence for flypaper effects is mixed. This result has policy implications and provides empirical evidence to Ministry to Finance about the efficacy of intergovernmental transfers on ecological expenditure at the state government level.