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Mining Royalties and Incentives for Security Operations: Evidence from India's Red Corridor

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  • Oliver Vanden Eynde

    (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

Abstract

Can tax regimes shape the incentives of governments to engage in or support counterinsurgency operations? India's Maoist belt contains a large share of the country's most valuable mineral deposits. Indian mining royalties benefit the States, but they are set by the central government. States are largely responsible for counter-insurgency operations within their territory. Therefore, the royalty regime could shape the incentive of states to support counter-insurgency efforts ien mining areas. This paper exploits the introduction of a 10% ad valorem tax on iron ore that was responsible for a 10-fold increase in royalty collections by the affected State governments. In a panel of district-level violence outcomes between 2007 and 2011, I find that the royalty hike was followed by a significant intensification of State violence in those districts that contain deposits of iron ore. There is no such impact for the deposits of other key minerals that were not subject to the royalty hike: bauxite and coal. These results are consistent with states taking the fiscal value of districts into account when they decide on the intensity of security operations.

Suggested Citation

  • Oliver Vanden Eynde, 2015. "Mining Royalties and Incentives for Security Operations: Evidence from India's Red Corridor," PSE Working Papers halshs-01245496, HAL.
  • Handle: RePEc:hal:psewpa:halshs-01245496
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01245496
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    References listed on IDEAS

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    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.
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    7. Oliver Vanden Eynde, 2015. "Targets of violence: evidence from India's Naxalite conflict," Working Papers halshs-01202689, HAL.
    8. Oeindrila Dube & Juan F. Vargas, 2013. "Commodity Price Shocks and Civil Conflict: Evidence from Colombia," Review of Economic Studies, Oxford University Press, vol. 80(4), pages 1384-1421.
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    12. 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.
    13. Paul Collier & Anke Hoeffler, 2004. "Greed and grievance in civil war," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 563-595, October.
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    Cited by:

    1. Oliver Vanden Eynde, 2015. "Targets of violence: evidence from India's Naxalite conflict," Working Papers halshs-01202689, HAL.
    2. Fetzer, Thiemo & Marden, Samuel, 2016. "Take what you can: property rights, contestability andconflict," LSE Research Online Documents on Economics 66534, London School of Economics and Political Science, LSE Library.
    3. Eli Berman & Mitch Downey & Joseph Felter, 2016. "Expanding Governance as Development: Evidence on Child Nutrition in the Philippines," NBER Working Papers 21849, National Bureau of Economic Research, Inc.
    4. Jean-Paul Azam & Kartika Bhatia, 2017. "Provoking insurgency in a federal state: theory and application to India," Public Choice, Springer, vol. 170(3), pages 183-210, March.
    5. repec:wly:econjl:v:128:y:2018:i:609:p:887-916 is not listed on IDEAS
    6. 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.
    7. Thiemo Fetzer & Samuel Marden, 2016. "Take what you can: property rights, contestability and conflict," Working Paper Series 9216, Department of Economics, University of Sussex.

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    Keywords

    Conflict; taxation; natural resources;

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