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

Author

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  • 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
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