 Fiscal Decentralization, the Composition of Public Spending, and Regional Growth in IndiaTao Zhang () and Heng-Fu Zou () No 521, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics Abstract: In this paper, we present an analytical model for examining the growth impact of intergovernmental and intersectoral allocation of public expenditure. The model helps us quantify the role of fiscal decentralization in regional economic growth and identify whether central and local allocation of public spending among various sectors are growth-enhancing. Applying our analytical framework to a panel data set of 16 major states in India, we have found that, in many cases of our regressions, fiscal decentralization is positively, and even statistically significantly, associated with state economic growth. The state allocation of public spending in various sectors is broadly consistent with "growth-maximizing", whereas increases in the central allocation of its budget among development projects, nondevelopment projects, and social and community services by cutting the center¡¯s spending on all other functions can promote regional growth. Furthermore, the distortionary effect of the state tax in India is dominated by the productive effect of tax-financed public spending, whereas the reverse holds for the central tax. Date: 1997 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cuf:wpaper:521 Access Statistics for this paper More papers in CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics Contact information at EDIRC. |
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