Fixing Market Failures or Fixing Elections? Agricultural Credit in India
AbstractThis paper integrates theories of political budget cycles with theories of tactical electoral redistribution to test for political capture in a novel way. Studying banks in India, I find that government-owned bank lending tracks the electoral cycle, with agricultural credit increasing by 5-10 percentage points in an election year. There is significant cross-sectional targeting, with large increases in districts in which the election is particularly close. This targeting does not occur in nonelection years or in private bank lending. I show capture is costly: elections affect loan repayment, and election-year credit booms do not measurably affect agricultural output. (JEL D72, O13, O17, Q14, Q18)
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Journal: Applied Economics.
Volume (Year): 1 (2009)
Issue (Month): 1 (January)
Other versions of this item:
- Shawn A. Cole, 2008. "Fixing Market Failures or Fixing Elections? Agricultural Credit in India," Harvard Business School Working Papers 09-001, Harvard Business School.
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
- Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
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