The literature on estimating macroeconomic effects of fiscal policy requires suitable instruments to identify exogenous and unanticipated spending shocks. So far, the instrument of choice has been military build-ups. This instrument, however, largely limits the analysis to the US as few other...

In an endogenous growth model with two public goods, we analytically derive the optimal composition of government spending in the presence of corruption. Although corruption results in a loss of productivity per se, an increase in corruption in the category of public spending that is harmed...

In the context of strikingly low literacy rates among Indian women and low caste population, the paper explores whether and how far the interests of the marginalized poor are undermined by the dominant elite consisting mainly of the landed and the capitalists. We distinguish the dominant elite...

Literacy rates continue to be strikingly low among women and low caste population compared to the general population not only in any Indian state, but more so in the worst performing ones. The present paper offers an explanation of this disparate development in terms of the hypothesis of elite...

Ramey (2011a) and others argue that increases in government spending associated with wars and military build-ups constitute a good instrument for measuring the macroeconomic effects of fiscal shocks. We argue that this instrument has two important drawbacks: the composition of government...

We revisit the relationship between financial development and economic growth in a panel of 52 middle income countries over the 1980-2008 period, using pooled mean group estimator in a dynamic heterogeneous panel setting. We show that financial development does not have a linear positive...

In this paper we examine the implication of a simple class of fiscal rules for long-run economic growth and welfare. The golden rule of public finance (GRPF) that we examine is motivated by institutional arrangements in countries such as Germany and the UK. We find that rules which seek to limit...

We investigate the short-term effects of fiscal adjustment on economic activity in 20 OECD countries from 1970 to 2009. We compare two approaches: the traditional approach based on changes in cyclically adjusted primary balance (CAPB) and the narrative approach based on historical records....

In an endogenous growth model with two public services with differing productivities, this paper analytically characterises optimal fiscal policy for a decentralised economy, whereby the optimal values of the growth rate, tax rate and expenditure shares on the two public goods are linked...

This paper examines, both theoretically and empirically, how initial inequality affects economic growth with particular reference to the subnational states in India, for which no such evidence exists. The theoretical model is characterized by endogenous growth within an OLG set-up, where growth...