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Efficiency and Equity in the Location of Indivisible Local Public Goods
-- Joan Pasqual, Evans Jadotte and Emilio Padilla
Unlike the typical issue in which optimality requires some amount of local public goods
provided in every town/locality, determining the best location for an indivisible local collective good,
is not straightforward by merely appealing to the Pareto efficiency criterion. If two cities
are considered, the welfare possibilities frontier associated with the location of a particular good
in one city not always dominates or is dominated by its counterpart in the other city.
Three alternatives are suggested to solve this indeterminacy issue: disregard the equity criterion,
shun the Pareto efficiency criterion, or complement the latter with some distributive criterion. In
the present study, several approaches deciding on this issue are evaluated, viz., a social
welfare function, Kaldor and Rawls criteria, unanimity, simple majority and despotism.
© 2010 IUP. All Rights Reserved.
Finances of Local Self-Governments
in West Bengal
-- Tapan Kumar Ghosh and Paramita Dasgupta
One of the greatest weaknesses of erstwhile Panchayati Raj Institutions (PRIs) was that
they were starved of funds. They had very little resources of their own and were usually dependent
on the government for their funds. If the local bodies fulfill the functions expected of them, there
is a need for mobilization of substantial resources. However, they operate under certain
constraints. They tend to be weak because their financial resources are limited. Mobilization of resources
has not been a strong point of the local governments, at least in the rural areas. Thus,
internal resource generation of Panchayats at all levels is very poor. The receipts from all sources do
not cover more than a fifth of their total receipts. As a result, they are considered as totally
dependent on the state. This paper attempts to examine the existing status of Panchayati Raj (PR)
finances in West Bengal with reference to their composition and trends (both receipts and
expenditure) and to assess the revenue mobilization effort of the PRIs in both tax and non-tax spheres. It
then tries to suggest measures to improve the financial administration of the PRIs. Further, it
focuses on some newer sources of revenue, which could possibly be utilized by the PRIs with
political will. The third-tier of the PRIs, viz., the Gram Panchayats (GPs) have been mostly dealt with
in the analysis.
© 2010 IUP. All Rights Reserved.
Union Budget, 2009-10: Balanced and Growth-Oriented
-- Bheemanagouda and J Madegowda
Global economic slowdown/meltdown, decline in the Gross Domestic Product (GDP)
growth rate, retrenchment of employees by a few large scale organizations (more particularly, the
IT and BT companies), etc., posed a number of challenges to the government in the form
of revival of the economy to achieve atleast 9% growth in GDP, broadening and deepening of
the policies and programs for inclusive growth, and to improve the effectiveness of the
delivery mechanism of the government. Further, all sections of the economy including
individuals, corporate, market, international players, etc., were expecting more from this year's
budget. Under these challenges, pulls and pressures, constraints, etc., the Finance Minister has
done a good job to prepare a balanced and growth-oriented budget. This paper makes an attempt
to present the highlights of the Union Budget for 2009-10 and to make an evaluation of the same.
© 2010 IUP. All Rights Reserved.
State of Finances of Uttar Pradesh:
Retrospect and Prospect
-- Ratna Vadra
More and more states are now turning to fiscal reforms as the only way out of the
financial crisis they are facing. Uttar Pradesh is not far behind. Uttar Pradesh, the most populous
state of India, with 16% of India's population offers the country
the largest market. Uttar Pradesh is passing through fiscal crisis as there is a lack of financial prudence.
The State has taken an initiative to implement some of the reforms in
the coming years. The study focuses on the trends of the revenues, expenditures and fiscal indications of Uttar
Pradesh during the period 1990-91 to 2008-09. The paper also studies the major fiscal reforms taken
by Uttar Pradesh in recent years.
© 2010 IUP. All Rights Reserved.
Local Public Education and Childless Voting:
The Arising of an "Ends with the Middle"
Coalition
-- Berardino Cesi
It is shown that local provision of public education increases the human capital of
school-age children and the value of the housing. The second effect, called capitalization, means that
the higher the expenditure in local public education, the higher the value of the housings. In a
two-community model, we show that when capitalization is sufficiently strong, the
marginal benefit from the higher tax, capitalized into the housing price, allows childless households
to vote for a positive tax. In particular, low income childless households vote for a tax raise
when capitalization is strong, whereas high income childless supports a higher tax when
capitalization is weak. The median income voter is never pivotal because "ends with the middle"
coalitions arise; high income households (with and without a child) make coalition with middle
income class with a child, whereas low income households (with and without a child) make
coalition with childless middle income class. We find that the income of the childless median voter
is higher than the median income, whereas the median voter with a child has income lower
than the median. Thus, the equilibrium tax preferred by the median voter (childless or not), is
higher than the tax preferred by the childless median income voter and lower than the tax preferred
by the median income voter with a child. This result implies that it is not possible to exclude
voting equilibria in which the tax of the childless median voter is higher than the tax of the
median voter with a child. When capitalization disappears, only households with a child vote for
a positive tax, coalitions among the voters with and without a child arise to block public
provision of local education.
© 2010 IUP. All Rights Reserved.
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