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Electoral Accountability and the Natural Resource Curse: Theory and Evidence from India

Listed author(s):
  • Dhillon, Amrita
  • Krishnan, Pramila
  • Patnam, Manasa
  • Perroni, Carlo

The literature on the effects of natural resource abundance on economic growth is converging to the view that institutions play a central role. In this paper, we exploit the break up of three of the biggest Indian states, comprising areas with some of the largest endowments of natural resources in the country, to explore how the link between electoral accountability and natural resource abundance can explain differences in outcomes. Our theoretical framework shows that while states inheriting a larger share of natural resources after break up are potentially richer, the spatial distribution of these natural resources within these state can worsen economic outcomes by lowering electoral accountability. We employ a sharp regression discontinuity design to estimate the causal effect of secession and concentrated resources on growth and inequality at the sub-regional level, using data on satellite measurements of night-time lights. Consistent with our theoretical predictions, the economic effect of secession is generally favourable. However, states that inherit a large fraction of mineral rich constituencies experience worse outcomes. This may be accounted for by lower electoral accountability in those areas.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 11377.

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Date of creation: Jul 2016
Handle: RePEc:cpr:ceprdp:11377
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  1. Sandra E. Black, 1999. "Do Better Schools Matter? Parental Valuation of Elementary Education," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 577-599.
  2. Raymond Fisman & Florian Schulz & Vikrant Vig, 2012. "Private Returns to Public Office," Working Papers id:4979, eSocialSciences.
  3. Prakash, Nishith & Rockmore, Marc & Uppal, Yogesh, 2014. "Do Criminal Representatives Hinder or Improve Constituency Outcomes? Evidence from India," IZA Discussion Papers 8452, Institute for the Study of Labor (IZA).
  4. Francesco Caselli & Guy Michaels, 2013. "Do Oil Windfalls Improve Living Standards? Evidence from Brazil," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 208-238, January.
  5. Chakraborty, Lekha, 2014. "Revival of mining sector in India: Analysing legislations and royality regime," Working Papers 14/129, National Institute of Public Finance and Policy.
  6. Carlos A Leite & Jens Weidmann, 1999. "Does Mother Nature Corrupt? Natural Resources, Corruption, and Economic Growth," IMF Working Papers 99/85, International Monetary Fund.
  7. Gomes, Joseph Flavian, 2015. "The Political Economy of the Maoist Conflict in India: An Empirical Analysis," World Development, Elsevier, vol. 68(C), pages 96-123.
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