We extend the literature on local expenditure determination by showing that bargaining and grand coalition seem to facilitate collective decision-making in an assembly of elected councillors. We demonstrate that the solution of the game turns on the principle of equal relative concession. Based on limited experimentation, we assess the performance of local governments and find that group dominance frustrates local expenditure efficiency in urban localities of India.
Get full access to this article
View all access options for this article.
References
1.
Bahl, R.W. and Linn, J.F. (1992) Urban Public Finance in Developing Countries. New York: Oxford University Press.
2.
Bahl, R.W. and Nath, S. (1986) Public expenditure decentralisation in developing countries, Government and Policy, 4, pp. 405-418.
3.
Basu, K. (1980) Revealed Preference of Government. Cambridge: Cambridge University Press.
4.
Bird, R.M. (1992) Tax Policy and Economic Development. Baltimore, MD: Johns Hopkins University Press.
5.
Bowen, H.R. (1943) The interpretation of voting in the allocation of resources, Quarterly Journal of Economics, 58, pp. 27-48.
6.
Breton, A. (1974) The Economic Theory of Representative Government, ch 4. Chicago, IL: Aldine.
7.
Buchanan, J.M. and Tullock, G. (1966) Gains from trade, Ethics, 76(July), pp. 305-306.
8.
Chelliah, R.J. and Nath, S. (1984) Report on Property Tax System in Delhi, submitted to Delhi Administration, Government of India.
9.
Clarke, E.H. (1971) Multi-part pricing of public goods, Public Choice, 11, pp. 19-33.
Deller, S.C. and Chicoine, D.L. (1993) Representative versus direct democracy: a test of allocative efficiency in local government expenditures, Public Finance Quarterly, 21, pp.100-114.
12.
Downs, A. (1957) An Economic Theory of Democracy. New York: Harper and Row.
13.
Edgeworth, F.Y. (1881) Mathematical Physics (cited in the electronic version of W. S. Jevons' review in: Mind, 1981, 6, pp. 581-583).
14.
Enelow, J.M. and Hinich, M. (1984) The Spatial Theory of Voting: An Introduction. Cambridge: Cambridge University Press.
15.
Government Of West Bengal (1986) Report of the Municipal Finance Commission. Calcutta.
16.
Groves, T. and Ledyard, J. (1977) Some limitations of the demand revealing processes , Public Choice, 29, pp. 107-124.
17.
Groves, T. and Loeb, M. (1975) Incentives and public inputs, Journal of Public Economics, 4, pp.211-226.
18.
Kalai, E. and Smorodinsky, D. (1975) Other solutions to Nash's bargaining problem, Econometrica, 43, pp. 413-418.
19.
Martin, A. and Lewis, W.A. (1956) Patterns of public revenue and expenditure, The Manchester School of Economic and Social Studies, 24, pp. 203-244.
20.
Meltzer, A.H. and Richard, S.F. (1981) A rational theory of the size of government, Journal of Political Economy, 89, pp. 814-827.
21.
Musgrave, R.A. (1959) The Theory of Public Finance. London: McGraw Hill.
22.
Nath, S. (1987) Is residential property tax equitable ? A case study of Calcutta, Economic andPolitical Weekly, 18 July, pp. 1190-1196.
23.
Nath, S. and Purohit, B.C. (1992) A model of local fiscal choice, Public FinancelFinances Publiques, 47, pp. 93-110.
24.
Nath, S. and Schroeder, L. (1984) Property tax growth in metropolitan cities in India, Nagarlok (Urban Affairs Quarterly), 14(April-June), pp. 33-44.
25.
Niskanen, W.S. (1975) Bureaucrats and politicians, Journal of Law and Economics, 18(December), pp. 617-643.
26.
Nss (National Sample Survey) (Various dates) New Delhi, Government of India.
27.
Oates, W.E. (1972) Fiscal Federalism. New York : Harcourt Brace Jovanovich.
28.
Oates, W.E. (1985) Searching for leviathan: an empirical study, American Economic Review, 75, pp. 748-757.
29.
Ostrom, V. (1987) The Political Theory of Compound Republic. Lincoln, NB: University of Nebraska Press .
30.
Palfrey, T.R. and Srivastava, S. (1993) Bayesian Implementation. Chur : Harwood.
31.
Panizza, U. (1999) On the determinants of fiscal centralization: theory and evidence, Journal of Public Economics, 74, pp. 97-139.
32.
Paul, S. (1994) Public services for urban poor: report card on three Indian cities, Economic andPolitical Weekly, 10 December, pp. 3131-3134.
33.
Roberts, K.W.S. (1977) Voting over income tax schedule, Journal of Public Economics, 16, pp. 329-340.
34.
Romer, T. (1975) Individual welfare, majority voting, and the properties of a linear income tax, Journal of Public Economics, 14, pp. 163-185.
35.
Romer, T. and Rosenthal, H. (1979) Bureaucrats and voters: on the political economy of resource allocation by direct democracy, Quarterly Journal of Economics, 93, pp. 563-588. Roth, A. (1979) Axiomatic Models of Bargaining. New York: Springer-Verlag.
36.
Samuelson, P.A. (1954) The pure theory of public expenditure, Review of Economics and Statistics, 36, pp. 387-389.
37.
Sen, A.K. (1996) Inequality Re-examined. Harvard, MA: Harvard University Press.
38.
Tiebout, C. (1956) A pure theory of local expenditure, Journal of Political Economy, 64, pp.416-424.
39.
Warren, R., Rosentraub, M.S. and Wesehler, L.F. (1988) A community service budget, public private and third sector roles in urban services, Urban Affairs Quarterly , 23, pp.414-443.
40.
Wittman, D. (1989) Why democracies produce efficient results, Journal of Political Economy, 97, pp. 1395-1424.
41.
World Bank (1986) Urban public finance in developing countries: a case study of the Metropolitan Bombay. Report No. 76-113, Urban Development Department, The World Bank, Washington, DC.
