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Sweetening the Deal? Political Connections and Sugar Mills in India

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  • Sandip Sukhtankar

Abstract

Political control of firms is prevalent across the world. Evidence suggests that firms profit from political connections, and politicians derive benefit from control over firms. This paper investigates an alternative mechanism through which politicians may benefit electorally from connected firms, examining sugar mills in India. I find evidence of embezzlement in politically controlled mills during election years, reflected in lower prices paid to farmers for cane. This result complements the literature on political cycles by demonstrating how campaign funds are raised rather than used. Politicians may recompense farmers upon getting elected, possibly explaining how they can get away with pilferage. (JEL D72, G34, L66, O13, O17, Q12, Q13)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Applied Economics.

Volume (Year): 4 (2012)
Issue (Month): 3 (July)
Pages: 43-63

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Handle: RePEc:aea:aejapp:v:4:y:2012:i:3:p:43-63

Note: DOI: 10.1257/app.4.3.43
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  1. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2006. "Robust Inference with Multi-way Clustering," NBER Technical Working Papers 0327, National Bureau of Economic Research, Inc.
  2. Dinc, I. Serdar, 2005. "Politicians and banks: Political influences on government-owned banks in emerging markets," Journal of Financial Economics, Elsevier, Elsevier, vol. 77(2), pages 453-479, August.
  3. Min Shi & Jakob Svensson, 2003. "Political Budget Cycles: A Review of Recent Developments," Nordic Journal of Political Economy, Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 29, pages 67-76.
  4. Grossman, Gene M & Helpman, Elhanan, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 63(2), pages 265-86, April.
  5. Sandip Sukhtankar, 2012. "Sweetening the Deal? Political Connections and Sugar Mills in India," American Economic Journal: Applied Economics, American Economic Association, American Economic Association, vol. 4(3), pages 43-63, July.
  6. Wright, Gavin, 1974. "The Political Economy of New Deal Spending: An Econometric Analysis," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 30-38, February.
  7. E. Sridharan, 1999. "Toward state funding of elections in india? a comparative perspective on possible options," Journal of Economic Policy Reform, Taylor & Francis Journals, Taylor & Francis Journals, vol. 3(3), pages 229-254.
  8. Alberto Alesina & Nouriel Roubini & Gerald D. Cohen, 1997. "Political Cycles and the Macroeconomy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510944, December.
  9. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
  10. Snyder, James M, 1989. "Election Goals and the Allocation of Campaign Resources," Econometrica, Econometric Society, Econometric Society, vol. 57(3), pages 637-60, May.
  11. Thompson, Samuel B., 2011. "Simple formulas for standard errors that cluster by both firm and time," Journal of Financial Economics, Elsevier, Elsevier, vol. 99(1), pages 1-10, January.
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Cited by:
  1. Sandip Sukhtankar, 2012. "Sweetening the Deal? Political Connections and Sugar Mills in India," American Economic Journal: Applied Economics, American Economic Association, American Economic Association, vol. 4(3), pages 43-63, July.
  2. Devesh Kapur, Milan Vaishnav, 2011. " Quid Pro Quo: Builders, Politicians, and Election Finance in India- Working Paper 276," Working Papers, Center for Global Development 276, Center for Global Development.

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