Assignment-2 for Courses Public Economics and Econometrics

Public Economics-II: Project Work in Public Finance
Econometrics: Project Work in Public Finance

Total Marks-10

Nature of Assignment: Group work

Objectives of this Assignment:

(a)    Framing questions /issues related to some problems in Indian public finance scenario

(b)   Identifying variables and build tentative hypotheses around those issues

(c)    Gathering data information related to such variables

(d)   Analysing data and testing of hypotheses

(e)   Drafting small articles based on findings of data analysis

(f)     Dissemination through presentation of the article

Deadline

For the objectives (a) through (e) 18 May 2013.

Objective F will be undertaken during summer vacation. Marks for the assignment will be based on objectives (a) through (f).

Operational mechanism

There are nine groups comprising students of MSc 4^th Semester and MA 2^nd Semester for this assignment. The groups are as the following.

GROUP-1: Siba Sankar Mohanty, Kanika, Aastha, Vibha, Santosh, Bhuvan

GROUP-2: Siba Sankar Mohanty, Vidhi, Tanuja, Anchal

GROUP-3: Siba Sankar Mohanty,  Mollyshree, Manali, Sudhanshu

GROUP-4: Siba Sankar Mohanty, Tanya, Abhay, Ankit

GROUP-5: Siba Sankar Mohanty, Harsh, Divya, Neetika

GROUP-6: Siba Sankar Mohanty,  Deepika, Sikha, Monika

GROUP-7: Siba Sankar Mohanty,  Akansha, Aditi, Sumedha

GROUP-8: Siba Sankar Mohanty,  Sakshi, Santosh, Jyoti, Amrita

GROUP-9: Siba Sankar Mohanty, Mitali, Preeti, Navneet, Swati

Day-1: 7^th May 2013 Discussion at Conference Hall

Applying Aggregate Regression Approach to Study Taxable Capacity in an Economy (Suggested by 9^th Finance Commission)

Tentative Model:

Determined Variable: Either total tax revenue or per capita tax revenue

Explanatory Variables: Capacity indicators such as;

(a)    Per capita Income/ Per capita consumption expenditure

(b)   Level of urbanisation

(c)    Interpersonal Distribution of Income

(d)   Level of monetisation in the economy (Read this: http://lokkatha.com/Files_For_Download/Monetisation_Maldovian_Economy.pdf  retrieved from Center for Strategic Studies and Reforms)

(e)   Structural Composition of the Economy:  

(f)     You may keep on adding variables; but I would stop at ‘d’ only.

Method of Analysis: Either linear or log-linear OLS

Data and Sources:

(a)    GDP (discuss on what exact indicator of national income to take)- Source: NAS, CSO

(b)   Population (cannot have year wise population figures, need to extrapolate)- Census

(c)    Rural /Urban distribution of population

(d)   Year wise Gini Coefficients (Extrapolated from whatever data available in WDI)

(e)   Broad Money

(f)     Sectoral Composition (Handbook of Statistics on Indian Economy)

For the classroom purpose, I shall use the following datasets.

 (Macroeconomic Indicators) http://lokkatha.com/Files_For_Download/Macroeconomic.xls

(Sector Wise Composition of GDP) http://lokkatha.com/Files_For_Download/SectorwiseGDP.xls

(composition of direct and indirect taxes) http://lokkatha.com/Files_For_Download/directindirecttaxes.xls

(Components of Central Tax Receipts) http://lokkatha.com/Files_For_Download/taxcomponents.xls

(WDI Dataset for India) http://lokkatha.com/Files_For_Download/IND_Country_MetaData_en_EXCEL.xls

Econometric Issues Involved

(a)    Biases owing to model specification

(b)   Multicollinearity (owing to the nature of variables used)

(c)    Autocorrelation (time element involved)

(d)   Heterosc(k)edasticity

Tasks:

Formulate hypotheses

Test hypotheses

Modify variables used so that the econometric issues can be reasonably addressed 

Sources of Data

Handbook of Statistics on Indian Economy, Reserve Bank of India (http://www.rbi.org.in)

Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 7.1, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, July 2012.

World Development Indicators, World Bank