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POVERTY, ELITE HETEROGENEITY, AND THE ALLOCATION OF PUBLIC SPENDING: PANEL EVIDENCE FROM THE INDIAN STATES

Authors


  • Note: An earlier version of the paper has been circulated as “The Elite and the Marginalised: An Analysis of Public Spending in the Indian States.” Sarmistha Pal gratefully acknowledges the financial support from the Leverhulme Trust. We are grateful to two anonymous referees and the Managing Editor of this journal for very constructive feedback on an earlier version of the paper. We would also like to thank Tim Besley, Robin Burgess, and Berk Ozler for providing us with some of the state-level data used in the paper; and Indraneel Dasgupta, Marcel Fafchamps, Oded Galor, Paul Glewwe, Manash Ranjan Gupta, John Knight, Jianmarco Leòn, Anirban Mitra, Arthur van Soest, Francis Teal, Jonathan Temple, and also seminar participants at Brunel University, Indian Statistical Institute (Delhi), CSAE (Oxford), and MWIEDC (Madison) for comments on earlier drafts of the paper. Any remaining errors are ours.

Sarmistha Pal, Department of Economics and Finance, Brunel University, Uxbridge UB8 3PH, Middlesex, UK (sarmistha.pal@brunel.ac.uk).

Abstract

In this paper, we explore how in India, the world's largest democracy, the presence of different elite groups—the dominant landed and capitalist elite, and the minority elite (who are the elected representatives of the marginalized women and low caste population)—could affect the nature and extent of public spending on various accounts, especially education. We argue that the productive cooperation between the capitalist elite and workers may induce capitalists to favor spending on education, while the landed elite tend to oppose investment in basic education because they are fearful of dilution of their political dominance by the educated poor. While the minority elite may tend to favor redistributive spending, including that on education, their effectiveness could be limited by their under-representation in the government. Results from the Indian states for the period 1960–2002 provide support for these hypotheses.

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