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Mumbai: Politics in India has increasingly revolved around the demand for special status and more funds by a few states. However, obtaining and spending more funds does not guarantee better outcomes for a state unless those are spent in an efficient manner. Data envelopment analysis (DEA) for states’ spending reveals that many states are operating much below the “efficient frontier", according to Ranjan Kumar Mohanty and N.R. Bhanumurthy of the National Institute of Public Finance and Policy (NIPFP), a research institute under the finance ministry. DEA is often used to compare the efficiency of factories or plants. Applied to Indian states, it reveals that western states such as Maharashtra, Goa, and Gujarat are relatively more efficient in spending their money on social sector, based on data from 2002-03, 2008-09 and 2015-16. The results also suggest that states are spending their resources more efficiently on education than on health and overall social sector.

Also Read: Assessing Public Expenditure Efficiency in Indian States

Aging population leads to greater industrial automation and usage of robots, according to a new National Bureau of Economic Research (NBER) working paper by Daron Acemoglu, professor of economics at MIT, and Pascual Restrepo, assistant professor at Boston University. They find that Germany and Japan, characterized by ageing population, have been the more enthusiastic adopters of automation. Thus an aging workforce does not necessarily mean falling productivity, especially when one accounts for the likely technological response to aging. Studying trends within US, the authors find that robots have been primarily deployed to replace middle-aged workers, i.e. those between the ages of 36 and 55. Hence, uptake of industrial automation is most likely in sectors and places where middle-aged and older workers are more predominant.

Also Read: Demographics and Automation

Being born into a rich family in USA increases your chances of ending up rich, unless of course you are Black, according to a new study by Raj Chetty, professor at Stanford University, and others. A Black American man hailing from a family in the top one-fifth income bracket is more likely to end up in the bottom one-fifth bracket – with a 21% chance – than remain in the top bracket, with a 17% chance. On the other hand, a white man born to a rich family has a 40% chance of remaining there. These conclusions are based on data from census and tax returns, used to study the journey of children born between 1978 and 1983. The disparity between Black and White adults hailing from similar family backgrounds is more pronounced in case of men than women, suggesting that Black men are often the worst victims of racism. Negative stereotypes about Black men, accompanied by higher chances of them facing police action or being incarcerated, might be impeding their career progress.

Also Read: Race and Economic Opportunity in the United States: An Intergenerational Perspective

The implementation of a congestion tax in central Stockholm resulted in a decrease in both pollution as well as asthma attacks in children, found a study published in the NBER by Emilia Simeonova, assistant professor at the John Hopkins Carey School of Business, and others. The government levied a charge on most vehicles entering the city centre of Stockholm, Sweden’s capital, from August 2007 onwards. This move reduced pollution from automobiles by 5 to 15%. This was accompanied by significant reductions in the incidence of childhood asthma in Stockholm in the months and years after the program. Given that improvements in health occurred even when pollution was already below US Environmental Protection Agency (EPA) standards, the authors suggest that health gains could be more significant in areas with higher pollution levels.

Also Read: Congestion Pricing, Air Pollution and Children’s Health

Global risk conditions no longer seem to affect cross-border lending by banks ever since the 2008-09 global financial crisis, according to research by Stefan Avdjiev, senior economist at the Bank for International Settlements (BIS), and others. This is because post-crisis, the share of euro-area banks in international lending market declined while it increased for banks from other advanced economies with relatively stronger, i.e. better capitalized, banking systems. These banks were better able to withstand fluctuations in global risk conditions, as their dependence on market for funding was relatively lesser. Instead, they relied more on traditional sources of funding such as deposits. Of course, support from the respective central banks, in the form of low interest rates and “quantitative easing" may have also aided the banks in maintaining steady flows.

Also Read: Global risk conditions now a weaker driver of global liquidity

Economics Digest runs weekly, and features interesting reads from the world of economics.

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