Expenditure allocation and welfare returns to government: a suggested model
Abstract
A model of government expenditure allocation among sectors is developed and its application is
illustrated through the data on major Indian states from 1971 to 1991. It is argued that, at the
margin, changes in expenditure allocation are determined not by the magnitude of marginal
productivities of the government effort, but by the behaviour of marginal returns in relative terms.
Nine indicators from education, health, nutrition and other social sectors measure the index of
basic welfare as the output of government efforts. Revenue and capital expenditures of state
governments on the economic (physical capital) sectors and social (human capital) sectors are
considered over two decades – 1971-81 and 1981-91 to examine the stability of the coefficients
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