Governments provide private goods as well as public services. We present a model of the private good - public good mix in public expenditure, and then apply it to explain the composition of spending by Indian state governments. The model explains why the publically provided private good to public good ratio is a decreasing function of the real income of voters, and is also decreasing in the degree of political competition. These hypotheses are tested on a panel of 14 Indian states for fiscal years 1987/88 to 2011/12. The long run results of three alternative ARDL models are broadly consistent with the proposed hypotheses, particularly the relationship between the private good share of state expenditures and real per capita incomes. They suggest that rising incomes and more effective political competition work together to improve a state’s policy mix and, in this sense, economic development becomes at least partially endogenous

Additional Metadata
Keywords Private versus public goods, the spending composition of Indian State, Governments, electoral competition, swing voters, partisan rents, the relative price of publically, supplied private goods, ARDL panel models.
Publisher Department of Economics
Series Carleton Economic Papers
Citation
Dash, B.B., Chakraborty, P., Ferris, J.S, & Winer, S.L. (2015). The Privateness of Public Expenditure with Application to Indian States (No. CEP 15-10). Carleton Economic Papers. Department of Economics.