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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
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    Cited by:

    1. Cogneau, Denis & Mo, Zhexun, 2024. "Enforcing Colonial Rule: Blood Tax and Head Tax in French West Africa," SocArXiv 7wnsz, Center for Open Science.
    2. Dominic Rohner, 2025. "Conflict," CESifo Working Paper Series 12035, CESifo.
    3. Downey, Mitch, 2021. "Did the war on terror deter ungoverned spaces? Not in Africa," Journal of Development Economics, Elsevier, vol. 151(C).
    4. Laura Mayoral & Hannes Mueller, 2025. "Rents, Rules or Revolution: A Survey of Institutional Pathways to Peace," Working Papers 1511, Barcelona School of Economics.
    5. Laville,Camille & Mandon,Pierre Jean-Claude, 2023. "Internal Conflicts and Shocks. A Narrative Meta-Analysis," Policy Research Working Paper Series 10315, The World Bank.
    6. Marion Richard & Oliver Vanden Eynde, 2025. "Cooperation between National Armies: Evidence from the Sahel borders," Nova SBE Working Paper Series wp2507, Universidade Nova de Lisboa, Nova School of Business and Economics.
    7. Samuel Lordemus & Noemi Kreif & Rodrigo Moreno‐Serra, 2024. "Public Healthcare Financing during Counterinsurgency Efforts: Evidence from Colombia," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 86(5), pages 1230-1259, October.
    8. 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).
    9. Crost, Benjamin & Felter, Joseph H. & Yamasaki, Yoko, 2025. "Labor intensity, market structure, and the effect of economic activities on civil conflict," Journal of Development Economics, Elsevier, vol. 174(C).
    10. Denis Cogneau & Zhexun Mo, 2025. "Enforcing Colonial Rule: Blood Tax and Head Tax in French West Africa," PSE Working Papers halshs-04823289, HAL.
    11. Fetzer, Thiemo & Vanden Eynde, Oliver & Wright, Austin L., 2026. "Team production on the battlefield: Evidence from NATO in Afghanistan," Journal of Economic Behavior & Organization, Elsevier, vol. 241(C).

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