Revenue–expenditure nexus of Indian states
Panel ARDL approach
Bibliographic Data
| ID | 6005857 |
|---|---|
| Authors | Himani Baxi (0000-0002-4034-679X, Pandit Deendayal Energy University), Dhyani Mehta (0000-0002-6783-0506, Pandit Deendayal Energy University) |
| Year | 2025 |
| Volume | 52 |
| Issue | 11 |
| Pages | 1628-1642 |
| Publication date | 2025-10-14 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | International Journal of Social Economics (JOURNAL) |
| Journal identifiers | ISSN: 0306-8293 • E-ISSN: 1758-6712 |
| Publisher | Emerald (PUBLISHER) |
| DOI | 10.1108/ijse-03-2024-0232 |
| OpenAlex | W4407209109 |
| Language | EN |
| References cited | 61 |
Purpose In India’s federal system, rising expenditure responsibilities and limited tax-raising powers challenge states’ fiscal stability. Analyzing the short- and long-term revenue–expenditure nexus and identifying fiscal consolidation strategies is crucial to managing fiscal deficits effectively. Design/methodology/approach The present study delves into the short- and long-term causal relationships between state expenditures and taxes, utilizing panel data from 29 Indian states. The use of panel autoregressive distributed lag. Findings The estimates confirm that the growth of state government spending and state government income (state gross domestic product) positively impacts state government taxes. Therefore, these findings lend support to the spend-tax hypothesis, both in the short run and long run. The estimates of spend-tax causality also suggest that states may not necessarily need to be concerned about controlling their expenditure and increasing fiscal deficits. Practical implications States in India can garner the necessary financial resources through either their own taxes or their share in central taxes to fulfill their expenditure needs. This, indeed, is an advantage of the federal system. Originality/value The outcomes of this investigation also prompt the necessity for a fresh assessment of the spend-tax hypothesis utilizing the variables of state expenditure and states’ owned tax income, excluding any form of central transfers. This study can be further added to the literature on causal link between expenditure and states’ own revenue in India and also reevaluate the progression of fiscal decentralization in the country. Peer review The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-03-2024-0232
Development economics · Econometrics · Economics · Macroeconomics · Monetary economics · Panel data · Revenue · Fiscal Policies and Political Economy · Fiscal Policy and Economic Growth · Monetary Policy and Economic Impact · Finance
Estimating long-run relationships from dynamic heterogeneous panels
The local power of some unit root tests for panel data
Statistical inference in vector autoregressions with possibly integrated processes
Toward A Second-Generation Theory of Fiscal Federalism
The saving and investment nexus for China
Testing for Granger non-causality in heterogeneous panels
General Diagnostic Tests for Cross Section Dependence in Panels
Unit root tests in panel data
Testing for unit roots in heterogeneous panels
Pooled Mean Group Estimation of Dynamic Heterogeneous Panels
Testing for a unit root in time series regression
Panel Cointegration
Spurious regression and residual-based tests for cointegration in panel data
An Essay on Fiscal Federalism
Distribution of the Estimators for Autoregressive Time Series with a Unit Root
Tax and Spend, or Spend and Tax
The Relationship Between Revenue and Expenditure in the Asean Countries
Causality and comovement between taxes and expenditures
Second generation fiscal federalism
The tax-spend debate
Expenditures and receipts
A Rational Theory of the Size of Government
| Highly cited | No |
|---|