Artha Vijnana: Journal of The Gokhale Institute of Politics and Economics

G. Subrahmanyam , S. B. Swamy

Abstract

Management Involves the critical entrepreneurial function besides routine supervision. Since entrepreneurship is not an explicit input, its Impact on output gets refiected by the neutral efficiency parameter in a neoclassical production function framework. Employing the Cobb-Douglas production function, per (standard) branch Income differences between the 14 Large (LBG) and 13 Small (SBG) Bank Groups was accounted for in terms of differential neutral output efficiency, non-neutral resource efficiency use and resource input use per (standard) branch. During 1974-76, the LBG was found to have an edge over the SBC in neutral output efficiency which pattern reversed during 1984-86. The opposite was true with respect to the role of non-neutral resource efficiency use. The contribution of differential input use was in favour of the LBG though the size of the difference declined in convergence over the decade.

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G. Subrahmanyam , D. Balaiah

Abstract

Forecasts of state tax revenues become essential for more than one purpose. First revenue projections provide a useful starting point for working out the long-term prospects of growth and income responsiveness of state finances. Second, they provide a basis for analysing the past trends in the tax revenues in terms of the temporal movements in the tax elasticity parameter. Finally, separate information on the automatic growth and discretionary changes in the tax revenues helps state governments formulate plans for optimizing revenues from available sources. The objective of this paper is to gainfully adopt the Divisia method of total factor productivity measurement for the purpose of estimating tax elasticity - a parameter of paramount importance for federal-state fiscal devolutions - with more operational ease and minimum demands on data requirements than what the existing methods can do. The remainder of this paper is organized as follows: Section 2 explains the twin concepts of buoyancy and elasticity, Section 3 first briefly explains the three existing methods of tax elasticity estimation, then the mechanics of the Prest-Manfield method and the newly adopted Divisia method are presented. Since the Prest-Manfield method is the most popular technique currently in vogue in the field of tax elasticity estimation and forecasting, we believe it would be appropriate to use it as a reference frame for evaluating the relative efficiency of our Divisia method. Section 4 reports empirical estimates of the elasticity parameter, applying both the methods for the General Sales Tax (GST) and the State Excise (SE) of the State of Andhra Pradesh in India: the reason for selecting this case study is that the author has gainfully applied these techniques, recently, in a tax-forecasting project for the state. Section 5 presents some concluding remarks.

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