Fixing Market Failures or Fixing Elections? Agricultural Credit in India

Shawn Cole

American Economic Journal: Applied Economics, 2009, vol. 1, issue 1, 219-50

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 nonelection 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. (JEL D72, O13, O17, Q14, Q18)

JEL-codes: D72 O13 O17 Q14 Q18 (search for similar items in EconPapers)
Date: 2009
Note: DOI: 10.1257/app.1.1.219
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Citations: View citations in EconPapers (268)

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Working Paper: Fixing Market Failures or Fixing Elections? Agricultural Credit in India (2008)
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