Wirtschaftsforschung zu Zentral- und Südasien
News vom 25.05.2020
State Capacity and the Soft Budget Constraint: Fiscal Federalism, Indian Style
In this paper, we explore the effects of India’s federal structure on state-level fiscal responsibility. Drawing from a dataset that covers the period from 1991 to 2019, we argue that a low marginal retention rate, a high level of transfer dependence and a high level of borrowing dependence (soft budget constraints) from the central government facilitates lower levels of fiscal responsibility in intergovernmental relations. Our hypothesis is tested using random effects, and fixed effects panel estimations of regressions on fiscal responsibility outcomes across Indian states. We also account for the effects of the world’s largest employment program, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), on subnational fiscal responsibility. We find that the fulfillment of rural public employment measures is conducive to lower levels of fiscal responsibility. Moreover, we argue for the persistence of soft budget constraints as a key structural feature of Indian federalism.
History, Diversity & Development: Evidence from Afghan Provinces
In this paper, we explore the effects of historical and contemporary ethnolinguistic diversity on socio-economic development in Afghan provinces. Using a robust regression discontinuity design across historical and contemporary cultural borders, we find that higher levels of contemporary diversity are likely to induce lower levels of conflict, higher levels of income and trust, and lower levels of individualism. Historical ethnolinguistic borders are strongly associated with income, provision of public goods and political preferences in Afghanistan. The Old Persian empires of the Achaemenids, Parthians, and most importantly Sasanians, as well as the Turkic empires of Timurids and Chughtai have had a positive long-run impact on Afghan socio-economic development, while the opposite holds for Islamic Persian empires.