Essays in Fiscal Policy and Budgeting

Tax competition literature predicts a world where countries will suppress taxes on mobile capital to attract it from elsewhere. Do the countries of South East Asia interact with each other strategically and compete when setting corporate taxes or do they compete for capital through other incentives? Data was collected from World Bank and American Enterprise Institute to model the tax interaction across these countries as a spatially dependent process. Findings indicate that these countries compete in terms of taxes amongst themselves only to a limited extent, but try to attract capital through non-tax incentives. Moreover, the spread of production processes by MNCs in these countries are such that they can act as a block to attract capital from the rest of the world, while not competing too much amongst them. Does Soft Budget Constraint exist in Indian State finances? If it does what is its extent and how does it manifest itself? Using data from Reserve Bank of India and Ministry of Finance sources our analysis indicate that states in India do indeed enjoy the benefits of soft budget constraint and expect the Central government to bail them out through regular resource transfers. Can the Theory of Punctuated Equilibrium of policy making explain the pattern of jumps and stasis in Indian state budgets? Or can explanations like political business cycle and forecast error correction be sufficient to explain such patterns? A detailed study of the annual budgetary changes indicate that although such competing explanations can partly explain the pattern, but still the Punctuated Equilibrium Theory is strongly applicable in explaining the leptokurtic pattern of annual budgetary changes in India

Reprioritisation of public expenditure for human development.

Public expenditure ; Human development

Fiscal Competition versus Fiscal Harmonization: A Review of the Arguments

A substantial theoretical and empirical literature has developed to addresses the advantages and perils of tax competition and how far it may be desirable to advance tax harmonization. The basic idea of the early literature was that internationally mobile capital moves from countries with higher rates of corporate taxation to lower rate countries. This limits the ability of the governments to tax capital and tend to reduce tax revenue of the government. Subsequent research has extended the basic model of tax competition by incorporating several important facets and qualifications to better reflect the real world. These studies have reached conclusions which are either starkly different from the early literature or have added important qualification to those. The principle theme of these new conclusions is that tax competition need not be as harmful as portrayed earlier. In the article we survey the extant theoretical literature on tax competition and tax harmonization and try to understand what lessons policy makers can learn from it

Reprioritisation of Public Expenditure for Human Development

An important method of managing resources to finance consistent and balanced human development lies in the reprioritisation of current expenditure in accordance with the urgent needs and shortfalls in particular areas. Such reprioritisation should also lead the states to a better macroeconomic future, through improvements in key areas. The key issue then is: what scope is there for reallocating public expenditures at the state level to finance increased attention to human development? To provide some empirical content to this discussion, the authors try to develop an objective method for reprioritisation of public expenditure in this paper. The suggested framework may be taken to yield a benchmark for any prescription for expenditure reallocation. [NIPFP WP]public expenditure, human development expenditure, incomes, state expenditure, Indian Economy, public finance