Pal, Rupayan and Das, Aparajita (2008): Decentralisation and Political Business Cycle: Fund Utilization of the MP-LADS in India.
This is the latest version of this item.
Download (199kB) | Preview
The Members of Parliament Local Area Development Scheme (MP-LADS) came in effect in 1993, closely followed by the 73rd Amendment to the Constitution, along with the wave of democratic decentralisation process in India. The MP-LADS allows for a fixed amount, non-lapsable Rs. 2 crores per year for each Member of the Parliament (MP), at the discretion of the MPs to carry out developmental works of capital nature in their respective constituencies. In last 14 years, more than 8 times of the annual expenditure on higher education by the central government has been spent on the MP-LADS. This paper examines whether there is any political business cycle in spending funds under the MP-LADS, its extent, and determinants. We find that there are political business cycles in spending by the MPs, and its extent varies across Lok Sabha constituencies. The extent of political business cycle is lower in case of leftist MPs compared to that in case of centrist and rightist MPs. Higher degree of competition faced in the last election by an MP induces him/her to misuse the scheme more severely, and younger MPs seems to be less inclined to generate political business cycle in spending. We also find that higher level of awareness of general citizens and better law and order conditions in states restricts MPs from misusing funds to gain political mileage.
|Item Type:||MPRA Paper|
|Original Title:||Decentralisation and Political Business Cycle: Fund Utilization of the MP-LADS in India|
|Keywords:||Decentralisation, Political Business Cycle, Local Area Development, Members of Parliament|
|Subjects:||D - Microeconomics > D7 - Analysis of Collective Decision-Making
O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O53 - Asia including Middle East
H - Public Economics > H7 - State and Local Government; Intergovernmental Relations
|Depositing User:||Rupayan Pal|
|Date Deposited:||18. Sep 2008 09:31|
|Last Modified:||12. Feb 2013 12:42|
Akhmedov, A. and Zharaskaya, E. (2004), Opportunistic political cycles: test in a young democracy setting, Quarterly Journal of Economics, 119, 1301-1338
Alderman. H (1998) Social Assistance in Albania: Decentralisation and Targeted Transfers, LSMS Working Paper. No. 134, World Bank, Washington D.C.
Alesina, A., Roubini, N., and Cohen, G. (1997), Political Cycles and the Macroeconomy, MIT Press, Cambridge, MA.
Azfar, O., Kahkonen S., and Meagher, P.(2000) Conditions for Effective Decentralised Governance: A Synthesis of Research Findings, IRIS Center Working Paper, University of Maryland.
Bardhan, P. (2002) Decentralisation of Governance and Development, Journal of Economic Perspectives. 16(4): 185-205
Blais, A., and Nadeau, R. (1992). The electoral budget cycle. Public Choice, 74, 389–403.
Blair, H. (2000) ‘Participation and Accountability at the Periphery: Democratic Local Governance in Six Countries’, World Development. 28 (1): 21–39.
Crook, R. C. and Manor, J. (1998) Democracy and Decentralisation in South Asia and West Africa.Cambridge University Press, Cambridge
Dreze, J. and Sen, A. (1996) India: Economic Development and Social Opportunity. Delhi: Oxford University Press.
Faguet, J. P. (2001) Does Decentralisation Increase Government Responsiveness to Local Needs? Decentralisation and Public Investment in Bolivia’, Centre for Economic Performance Working Paper, London School of Economics, London
Gurgur, T. and Shah, A. (2005) Localization and Corruption: Panacea or Pandora’s Box? World Bank Policy Research Working Paper, No. 3486, Washington, D.C
Kumar, G. N. (2006) Decentralisation and Local Finance, ADB-INRM Policy Brief. No. 9, Asian Development Bank, New Delhi
Mahal, A., Srivastava V., and Sanan, D. (2000) Decentralisation and Public Sector Delivery of Health and Education Services: The Indian Experience. ZEF –Discussion Papers On Development Policy, No. 20, Center for Development Research, Bonn.
Nordhaus, W. (1975). The political business cycle. Review of Economic Studies, 42, 169–190. Papke, L. E. and Wooldridge, J. 1996. Econometric methods for fractional response variables with an application to 401(k) plan participation rates. Journal of Applied Econometrics 11: 619–632.
PEO (2001), Evaluation Study on Member Parliament Local Area Development Scheme (MP-LADS), Program Evaluation Organisation’s Study, No.-184, Planning Commission, Government of India, New Delhi
Pettersson-Lidbom, P. (2001). An empirical investigation of the strategic use of debt. Journal of Political Economy, 109(3), 570–583.
Rogoff, K. (1990). Equilibrium political budget cycles. American Economic Review, 80, 21–36.
Rogoff, K., and Sibert, A. (1988). Elections and macroeconomic policy cycles. Review of Economics Studies, 55, 1–16.
Rose-Ackerman, S. (1997) Corruption and Development, Proceedings of the Annual Bank Conference on Development Economics, World Bank, Washington, D.C.
Santos, B. D. S. (1998) Participatory Budgeting in Porto Alegre: Toward A Redistributive Democracy, Politics and Society, vol. 26(4).
Seitz, H. (2000). Fiscal policy, deficits and politics of subnational governments: The case of the German Laender. Public Choice, 102, 183–218.
Shi, M., and Svensson, J. (2002), Conditional Political Budget Cycle, CEPR Discussion Paper No. 352.
Shirk, S. (1993) The Political Logic of Economic Reform in China, University of California Press, Berkeley
Singh, V., Gehlot, B., Start, D., and Johnson, C. (2003) Out of Reach: Local Politics and the Distribution of Development Funds in Madhya Pradesh, Overseas Development Institute’s Working Paper, No.-200, U.K.
Tanzi, Vito (2000), Some Politically Incorrect Remarks on Decentralisation and Public Finance. In: Dethier, Jean-Jacques (ed.) (2000), Governance, Decentralisation and Reform in China, India and Russia. Kluwer Academic Publishers and ZEF, p.47-64.
Qian, Y. and Roland, G. (1998) Federalism and the Soft Budget Constraint, American Economic Review, vol. 88(5).
Available Versions of this Item
Decentralisation and Political Business Cycle: Fund Utilization of the MP-LADS in India. (deposited 08. Feb 2008 13:43)
- Decentralisation and Political Business Cycle: Fund Utilization of the MP-LADS in India. (deposited 18. Sep 2008 09:31) [Currently Displayed]