IDEAS home Printed from https://ideas.repec.org/a/tpr/restat/v105y2023i1p217-225.html
   My bibliography  Save this article

Fiscal Incentives for Conflict: Evidence from India's Red Corridor

Author

Listed:
  • Jacob N. Shapiro

    (Princeton University)

  • Oliver Vanden Eynde

    (Paris School of Economics and CNRS)

Abstract

Can tax regimes shape the incentives to engage in armed conflict? Indian mining royalties benefit the states but are set by the central government. India's Maoist belt is mineral rich, and states are responsible for counterinsurgency operations. We exploit the introduction of a 10% ad valorem tax on iron ore that increased royalty collections of the affected states by a factor of 10. We find that the royalty hike was followed by a significant intensification of violence in districts with important iron ore deposits. The royalty increase was also followed by an increase in illegal mining activity in iron mines.

Suggested Citation

  • Jacob N. Shapiro & Oliver Vanden Eynde, 2023. "Fiscal Incentives for Conflict: Evidence from India's Red Corridor," The Review of Economics and Statistics, MIT Press, vol. 105(1), pages 217-225, January.
    • Handle: RePEc:tpr:restat:v:105:y:2023:i:1:p:217-225
    DOI: 10.1162/rest_a_01039
    as

    Download full text from publisher

    File URL: https://doi.org/10.1162/rest_a_01039
    Download Restriction: Access to PDF is restricted to subscribers.
    File URL: https://libkey.io/10.1162/rest_a_01039?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lei, Yu-Hsiang & Michaels, Guy, 2014. "Do giant oilfield discoveries fuel internal armed conflicts?," Journal of Development Economics, Elsevier, vol. 110(C), pages 139-157.
    2. Thiemo Fetzer & Stephan Kyburz, 2024. "Cohesive Institutions and Political Violence," The Review of Economics and Statistics, MIT Press, vol. 106(1), pages 133-150, January.
    3. Oliver Vanden Eynde, 2018. "Targets of Violence: Evidence from India's Naxalite Conflict," Economic Journal, Royal Economic Society, vol. 128(609), pages 887-916, March.
    4. Khanna, Gaurav & Zimmermann, Laura, 2017. "Guns and butter? Fighting violence with the promise of development," Journal of Development Economics, Elsevier, vol. 124(C), pages 120-141.
    5. Ch, Rafael & Shapiro, Jacob & Steele, Abbey & Vargas, Juan F., 2018. "Endogenous Taxation in Ongoing Internal Conflict: The Case of Colombia," American Political Science Review, Cambridge University Press, vol. 112(4), pages 996-1015, November.
    6. Thiemo Fetzer, 2020. "Can Workfare Programs Moderate Conflict? Evidence from India," Journal of the European Economic Association, European Economic Association, vol. 18(6), pages 3337-3375.
    7. Ernesto Dal Bó & Pedro Dal Bó, 2011. "Workers, Warriors, And Criminals: Social Conflict In General Equilibrium," Journal of the European Economic Association, European Economic Association, vol. 9(4), pages 646-677, August.
    8. Raúl Sánchez de la Sierra, 2020. "On the Origins of the State: Stationary Bandits and Taxation in Eastern Congo," Journal of Political Economy, University of Chicago Press, vol. 128(1), pages 32-74.
    9. Markus Bruckner & Antonio Ciccone, 2010. "International Commodities Prices, Growth and the Outbreak of Civil War in Sub-Saharan Africa," Working Papers 1008, BBVA Bank, Economic Research Department.
    10. Eli Berman & Aila M. Matanock, 2015. "The Empiricists' Insurgency," NBER Working Papers 21061, National Bureau of Economic Research, Inc.
    11. Oeindrila Dube & Juan F. Vargas, 2013. "Commodity Price Shocks and Civil Conflict: Evidence from Colombia," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(4), pages 1384-1421.
    12. Samuel Bazzi & Christopher Blattman, 2014. "Economic Shocks and Conflict: Evidence from Commodity Prices," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(4), pages 1-38, October.
    13. Adnan Q. Khan & Asim I. Khwaja & Benjamin A. Olken, 2016. "Tax Farming Redux: Experimental Evidence on Performance Pay for Tax Collectors," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(1), pages 219-271.
    14. Nicolas Berman & Mathieu Couttenier & Dominic Rohner & Mathias Thoenig, 2017. "This Mine Is Mine! How Minerals Fuel Conflicts in Africa," American Economic Review, American Economic Association, vol. 107(6), pages 1564-1610, June.
    15. Markus Brückner & Antonio Ciccone, 2010. "International Commodity Prices, Growth and the Outbreak of Civil War in Sub-Saharan Africa," Economic Journal, Royal Economic Society, vol. 120(544), pages 519-534, May.
    16. Government Andhra Pradesh, 2008. "Andhra Pradesh Budget 2008-09," Working Papers id:1416, eSocialSciences.
    17. Kishore Gawande & Devesh Kapur & Shanker Satyanath, 2017. "Renewable Natural Resource Shocks and Conflict Intensity," Journal of Conflict Resolution, Peace Science Society (International), vol. 61(1), pages 140-172, January.
    18. Saavedra, S & Romero, M, 2019. "Local Incentives and National Tax Evasion: Unintended Effects of a Mining Royalties Reform in Colombia," Documentos de Trabajo 17529, Universidad del Rosario.
    19. Thiemo Fetzer, 0. "Can Workfare Programs Moderate Conflict? Evidence from India," Journal of the European Economic Association, European Economic Association, vol. 18(6), pages 3337-3375.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Saavedra, Santiago & Romero, Mauricio, 2021. "Local incentives and national tax evasion: The response of illegal mining to a tax reform in Colombia," European Economic Review, Elsevier, vol. 138(C).
    2. Downey, Mitch, 2021. "Did the war on terror deter ungoverned spaces? Not in Africa," Journal of Development Economics, Elsevier, vol. 151(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Oliver Vanden Eynde, 2015. "Mining Royalties and Incentives for Security Operations: Evidence from India's Red Corridor," PSE Working Papers halshs-01245496, HAL.
    2. Alex Dickson & Ian A MacKenzie & Petros G Sekeris, 2018. "The role of markets and preferences on resource conflicts," Working Papers 1819, University of Strathclyde Business School, Department of Economics.
    3. Mahdi FAWAZ, 2020. "Ressources naturelles et guerres civiles au Moyen-Orient," Bordeaux Economics Working Papers 2020-09, Bordeaux School of Economics (BSE).
    4. Massimiliano Calì & Alen Mulabdic, 2017. "Trade and civil conflict: Revisiting the cross-country evidence," Review of International Economics, Wiley Blackwell, vol. 25(1), pages 195-232, February.
    5. Alex Dickson & Ian A. MacKenzie & Petros G. Sekeris, 2022. "The role of markets on resource conflicts," Scandinavian Journal of Economics, Wiley Blackwell, vol. 124(3), pages 677-708, July.
    6. Francesco Amodio & Leonardo Baccini & Michele Di Maio, 2021. "Security, Trade, and Political Violence," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 1-37.
    7. Roland Hodler & Paul Schaudt & Alberto Vesperoni, 2023. "Mining for Peace," CESifo Working Paper Series 10207, CESifo.
    8. Dominic Rohner & Mathias Thoenig, 2021. "The Elusive Peace Dividend of Development Policy: From War Traps to Macro Complementarities," Annual Review of Economics, Annual Reviews, vol. 13(1), pages 111-131, August.
    9. Arinze Nwokolo, 2018. "Oil Price Shocks and Civil Conflict: Evidence from Nigeria," HiCN Working Papers 274, Households in Conflict Network.
    10. Gautam Bose & Mitchell Choi & Hasin Yousaf, 2021. "Culture, Economic Shocks and Conflict: Does trust moderate the effect of price shocks on conflict?," Discussion Papers 2021-03, School of Economics, The University of New South Wales.
    11. Fetzer, Thiemo, 2019. "Can Workfare Programs Moderate Conflict? Evidence from India," The Warwick Economics Research Paper Series (TWERPS) 1220, University of Warwick, Department of Economics.
    12. Jørgen Juel Andersen & Martin Nordvik & Andrea Tesei, 2017. "Oil and Civil Conflict: On and Off (Shore)," Working Papers 810, Queen Mary University of London, School of Economics and Finance.
    13. Thiemo Fetzer, 2020. "Can Workfare Programs Moderate Conflict? Evidence from India," Journal of the European Economic Association, European Economic Association, vol. 18(6), pages 3337-3375.
    14. Babatunde Abidoye & Massimiliano Calì, 2021. "Income Shocks and Conflict: Evidence from Nigeria," Journal of African Economies, Centre for the Study of African Economies, vol. 30(5), pages 480-509.
    15. Massimo Morelli & Dominic Rohner, 2023. "Natural resources and conflict: The crucial role of power mismatch and geographic asymmetries," Working Papers 698, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    16. Stoop, Nik & Verpoorten, Marijke & van der Windt, Peter, 2019. "Artisanal or industrial conflict minerals? Evidence from Eastern Congo," World Development, Elsevier, vol. 122(C), pages 660-674.
    17. Phoebe W. Ishak & Mohammad Reza Farzanegan, 2022. "Oil price shocks, protest, and the shadow economy: Is there a mitigation effect?," Economics and Politics, Wiley Blackwell, vol. 34(2), pages 298-321, July.
    18. Thiemo Fetzer & Pedro C. L. Souza & Oliver Vanden Eynde & Austin L. Wright, 2021. "Security Transitions," American Economic Review, American Economic Association, vol. 111(7), pages 2275-2308, July.
    19. Verme, Paolo & Schuettler, Kirsten, 2021. "The impact of forced displacement on host communities: A review of the empirical literature in economics," Journal of Development Economics, Elsevier, vol. 150(C).
    20. Eoin McGuirk & Marshall Burke, 2020. "The Economic Origins of Conflict in Africa," Journal of Political Economy, University of Chicago Press, vol. 128(10), pages 3940-3997.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:105:y:2023:i:1:p:217-225. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kelly McDougall (email available below). General contact details of provider: https://direct.mit.edu/journals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.