Fixing Market Failures or Fixing Elections? Agricultural Credit in India

Shawn Cole

No 09-001, Harvard Business School Working Papers from Harvard Business School

Abstract: This paper integrates theories of political budget cycles with theories of tactical electoral redistribution to test for political capture in a novel way. Studying banks in India, I find that government-owned bank lending tracks the electoral cycle, with agricultural credit increasing by 5-10 percentage points in an election year. There is significant cross-sectional targeting, with large increases in districts in which the election is particularly close. This targeting does not occur in non-election years, or in private bank lending. I show capture is costly: elections affect loan repayment, and election year credit booms do not measurably affect agricultural output.

Pages: 50 pages
Date: 2008-07
New Economics Papers: this item is included in nep-agr, nep-ban, nep-cdm, nep-cwa, nep-dev, nep-mfd and nep-pol
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Citations: View citations in EconPapers (2)

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Journal Article: Fixing Market Failures or Fixing Elections? Agricultural Credit in India (2009)
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