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

Author

Listed:
  • Jacob Shapiro

    (Princeton University)

  • Oliver Vanden Eynde

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

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 Shapiro & Oliver Vanden Eynde, 2023. "Fiscal Incentives for Conflict: Evidence from India's Red Corridor," Post-Print halshs-03325898, HAL.
    • Handle: RePEc:hal:journl:halshs-03325898
    DOI: 10.1162/rest_a_01039
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03325898
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    2. 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).

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