Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144183
Authors: 
Haasnoot, Cornelis W.
Year of Publication: 
2016
Series/Report no.: 
GIGA Working Papers 285
Abstract: 
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. I 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.
Subjects: 
India
fiscal federalism
government quality
ethnic heterogeneity
state reorganization
JEL: 
H11
H40
H50
H72
H77
Document Type: 
Working Paper

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