Does Size Matter? The Productivity of Government Expenditures and the Size of States: Evidence from India

Published By: GIGA on eSS | Published Date: May, 01 , 2016

Some politicians argue for the splitting and combining of states to increase government productivity, but there is a dearth of empirical evidence on the optimal size of a state. Using data from Indian states, I test a model of the optimal size of the state. The paper find that size and preference heterogeneity do not significantly affect the productivity of a state government. However, when states are split up, the productivity of the root state’s government is negatively affected. This suggests that there may be a readjustment phase after state reorganisation that brings about this negative effect. It is important to consider this effect when redrawing state borders.

Author(s): Cornelis Haasnoot | Posted on: May 18, 2016 | Views()

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