Political budget cycles in federal systems: The case of India

Sourav Das (), Patrick Hufschmidt (), Fabian Mankat () and Konstantinos Theocharopoulos ()
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Sourav Das: University of Kassel
Patrick Hufschmidt: Technical University of Dortmund
Fabian Mankat: University of Kassel
Konstantinos Theocharopoulos: University of Siegen

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: This paper examines Political Budget Cycles in federal systems, focusing on how a central incumbent allocates discretionary transfers across states in response to electoral incentives. We develop a theoretical model predicting that average discretionary transfers increase during federal election periods. While swing states consistently receive higher discretionary transfers due to their electoral competitiveness, the election-period increase is larger for non-swing states. Using a panel dataset of Indian states from 2006 to 2022, we find evidence consistent with the theoretical model: discretionary transfers are significantly higher in federal election periods, swing states receive more discretionary transfers in non-election periods, and the election-period increase in discretionary transfers is more pronounced for non-swing states.

Keywords: Political budget cycles; Swing states; Federal systems; Elections; India (search for similar items in EconPapers)
JEL-codes: D83 E62 H70 H72 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2025-07
New Economics Papers: this item is included in nep-pol
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