On Autonomous Devolution from the Union Government, Provision of Local Public Goods and Welfare of the States

Moumita Chel and Vivekananda Mukherjee

Indian Economic Review, 2016, vol. 51, issue 1, 21-41

Abstract: Recently the Fourteenth Finance Commission of India has recommended an increase in tax devolution from 32% to 42% of the divisible pool of Union taxes to the states.Would it raise the provision of local public goods at the states and their welfare? The paper models the game between the Union government and the state governments and derives the conditions under which the increase in autonomous transfer would increase the provision of local public goods at the states and would raise their welfare. It extends the model to discuss the case with matching grants as well.

Keywords: Fiscal Federalism; Local Public Goods; Matching Grant (search for similar items in EconPapers)
JEL-codes: H41 H70 (search for similar items in EconPapers)
Date: 2016
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