Defence spending, fiscal federalism, and economic growth in India: A new approach

Abstract

This paper proposes a new approach to the analysis of the military expenditure ‐ growth nexus, applied to the case of India. Military expenditure has, first, a direct impact on the central government budgetary decisions, with a variety of crowding‐out effects on other public spending. Second, there is an interaction with local government expenditure decisions in a federal state structure such as the Indian one, in particular through changes in the transfer of income from the central government to local governments. Third, all these fiscal decisions have an impact on growth through the accumulation of human capital and through infrastructure building. Government expenditure behaviours are estimated on Indian times series specifically built for this purpose, while their impact on growth are evaluated through simulations of a calibrated endogenous growth model of India.

Key Words:

• National Government Expenditures
• Economics of Defence
• Growth Models

Notes

Corresponding author. E‐mail: [email protected].

Additional information

Notes on contributors

Jean‐Claude Berthélemy

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