Local public goods in a democracy: Theory and evidence from rural India

Author name: 
Santanu Gupta
Raghbendra Jha

This paper examines allocation of local public goods over jurisdictions (villages)with individuals with identical tastes and different incomes, in a model with demo-cratic institutions and majority rule. The median voter (in income) in each juris-diction determines the probability of re-election for the incumbent government. Thejurisdiction with the median of these median voters is most favoured. With identi-cal median voters in jurisdictions, and with re-election requiring less than 50man-date, jurisdictions with higher income inequality get favoured. Results from a surveydata (from NCAER) on infrastructure provision in 1669 Indian villages confirm thishypothesis. Ethnic fragmentation does not affect public good provision but politi-cal fragmentation does. Finally, villages with the median population are the mostfavoured for public goods allocation. Sparsely populated and too densely populatedvillages are relatively neglected.

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