Economic and Political determinants of government expenditure in the state of Jammu and Kashmir (India): A multivariate co-integration analysis

Samir Ul Hassan and Biswhambhara Mishra

2017 Papers from Job Market Papers

Abstract: The study examine the long and short run determinants of marked expansion of government expenditure in the state of Jammu and Kashmir. Using annual time series data for the period 1984-2013 and broader data pertaining to economic and political dimension, the paper seeks to identify the significant variables from each dimension that determines the growth of government expenditure in the state. Further, an attempt is made to examine whether the short run economic and political dimensions play any significant role in correcting the disequilibrium in government expenditure over the long run. Using multivariate co-integration technique followed by VECM and OLS model, we find that that absolute level of Government expenditure is largely determined by economic and political environment in the state. From the point of view of economic dimension, the study reveals that NSDP, tax revenue and grants from center are positively significant in determining government expenditure both in long as well as short run, while rate of unemployment and Gross fiscal deficit are found to be negative but significant determinants of government expenditure both in long and short run. An analysis of political dimension exhibits that Majoritarian government leads to lesser government expenditure than coalition government or governorâs rule. Law and order found to be negative but significant determinant of government expenditure while as election cycle is insignificant. Finally, the study reveals that the speed of adjustment of economic variables is significant and any disequilibrium in government expenditure is being restored by economic variables within the period of 2 years.

JEL-codes: B23 D74 H3 H5 (search for similar items in EconPapers)
Date: 2017-10-20
New Economics Papers: this item is included in nep-pbe and nep-pol
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