Elite dominance and under-investment in mass education: Disparity in the social development of the Indian states, 1960-92

Literacy rates continue to be strikingly low among women and low caste population compared to the general population not only in any Indian state, but more so in the worst performing ones. The present paper offers an explanation of this disparate development in terms of the hypothesis of elite dominance that discriminates against women and low-caste people and systematically under-invests in mass education. We experiment with various indirect economic and political measures of elite dominance. Results based on the Indian state-level data for the period 1960-92 suggest that higher share of land held by the top 5% of the population (a) lowers spending on education as well as total developmental spending and (b) increases total non-developmental spending. (c) Greater proportion of minority representations (female and low caste members) in the ruling government however fails to have any perceptible impact on both development (including education) and non-development spending in our sample. (d) While underinvestment in education by the elite is supported by the lack of demand for education from the poorer population (who are often the marginalised people), greater initiatives of the state to enact land reform legislations enhance the spending on education

Corruption, fiscal policy, and growth: A unified approach

Copyright @ 2011 Brunel UniversityIn this paper, we study the effects of bureaucratic corruption on fiscal policy and the subsequent impact on economic growth. Here corruption takes three forms: (i) it reduces the tax revenue raised from households, (ii) it inflates the volume of government spending, and (iii) it reduces the productivity of ‘effective’ government expenditure. The analysis distinguishes between the case where fiscal choices are determined exogenously to ensure a balanced budget and the case where the government optimally sets its policy instruments. Our policy experiments reveal the complexity of the channels through which corruption impacts upon growth, and the conditions under which the direction of the effect takes shape. The findings from our unified framework could rationalise the diverse (and sometimes, apparently conflicting) empirical evidence on the impact of corruption on economic growth offered in the literature

On the composition of government spending, optimal fiscal policy, and endogenous growth: Theory and evidence

In an endogenous growth model with two public services with differing productivities, this paper analytically characterises optimal fiscal policy for a decentralised economy, whereby the optimal values of the growth rate, tax rate and expenditure shares on the two public goods are linked directly to their productivity parameters. Using panel data for 15 developing countries over 28 years, we show using GMM techniques, that current (capital) spending has positive (negative) and significant effects on the growth rate, contrary to commonly held views. Our theoretical results extend, and our empirical results modify those obtained by Devarajan et al. (1996)

The impact of government expenditure on growth: Empirical evidence from a heterogeneous panel

This paper investigates the impact of government expenditure on growth, in a heterogeneous panel for 15 developing countries. Using GMM techniques, we show that countries with substantial government expenditure have strong growth effects, which vary considerably across the nations