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

Jacob N. Shapiro and Oliver Vanden Eynde
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Jacob N. Shapiro: Princeton University

The Review of Economics and Statistics, 2023, vol. 105, issue 1, 217-225

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.

Date: 2023
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Related works:
Working Paper: Fiscal Incentives for Conflict: Evidence from India's Red Corridor (2023)
Working Paper: Fiscal Incentives for Conflict: Evidence from India's Red Corridor (2023)
Working Paper: Fiscal incentives for conflict: Evidence from India’s Red Corridor (2021)
Working Paper: Fiscal Incentives for Conflict: Evidence from India's Red Corridor (2020)
Working Paper: Fiscal Incentives for Conflict: Evidence from India's Red Corridor (2020)
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