Federalism, fiscal asymmetries and economic convergence: evidence from Indian States

Federalism, fiscal asymmetries and economic convergence: evidence from Indian States This paper tests economic convergence across States in India by incorporating federal fiscal asymmetries and differentials in gross fixed capital formation at the state level. Using dynamic panel models, it is observed that there is no unconditional convergence of economic growth. Controlling for state-wise asymmetries in fiscal policy variables, financial parameters, capital formation and human development outcomes using Arellano and Bond (JAMA 58: 277–297, 1991) panel data methodology, no strong evidence for conditional convergence is observed. It is observed from the GMM estimations that public capital spending has positive and significant relationship with economic growth. It is also observed that the quality of human capital formation is a pre-requisite for economic growth, both for club and (aggregate) conditional convergence. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Asia-Pacific Journal of Regional Science Springer Journals

Federalism, fiscal asymmetries and economic convergence: evidence from Indian States

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Publisher
Springer Singapore
Copyright
Copyright © 2018 by The Japan Section of the Regional Science Association International
Subject
Economics; Regional/Spatial Science; Asian Economics; Economic Theory/Quantitative Economics/Mathematical Methods
ISSN
2509-7946
eISSN
2509-7954
D.O.I.
10.1007/s41685-018-0087-z
Publisher site
See Article on Publisher Site

Abstract

This paper tests economic convergence across States in India by incorporating federal fiscal asymmetries and differentials in gross fixed capital formation at the state level. Using dynamic panel models, it is observed that there is no unconditional convergence of economic growth. Controlling for state-wise asymmetries in fiscal policy variables, financial parameters, capital formation and human development outcomes using Arellano and Bond (JAMA 58: 277–297, 1991) panel data methodology, no strong evidence for conditional convergence is observed. It is observed from the GMM estimations that public capital spending has positive and significant relationship with economic growth. It is also observed that the quality of human capital formation is a pre-requisite for economic growth, both for club and (aggregate) conditional convergence.

Journal

Asia-Pacific Journal of Regional ScienceSpringer Journals

Published: May 28, 2018

References

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