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Ecological Fiscal Transfers and State-level Budgetary Spending: Evidence for The Flypaper Effects in India

Publication date

Mar, 2021


NIPFP Working Paper No. 332


Amandeep Kaur, Ranjan Kumar Mohanty, Lekha Chakraborty, Divy Rangan


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 intergovernmental fiscal transfers or the states’ own incomedetermine the expenditure commitments on ecology at the State level. The econometric results show that the intergovernmental fiscal transfersrather than the states’ own incomedetermines ecological expenditure at subnational levels in India. The results hold, when the models are controlled for ecological outcomes and demographic variables. 
Keywords:Intergovernmental Transfers, Flypaper effect, Environmental Economics, Macroeconomic Policy, National Government Expenditures
JEL Classification: E6, H5,H7,Q5
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