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Resource Transfers to Local Governments: Political Manipulation and Household Responses in West Bengal

Pranab Bardhan, Sandip Mitra, Dilip Mookherjee () and Anusha Nath
Additional contact information
Sandip Mitra: Indian Statistical Institute
Dilip Mookherjee: Boston University
Anusha Nath: Federal Reserve Bank of Minneapolis

No dp-319, Boston University - Department of Economics - The Institute for Economic Development Working Papers Series from Boston University - Department of Economics

Abstract: We study how political support of household heads respond to receipt of different private and public good benefits delivered by local governments, and whether upper level governments respond strategically by manipulating program budgets to lower level government in West Bengal, India. We exploit redistricting of electoral boundaries by a non-partisan Election Commission, a plausibly exogenous shock to political competition. Consistent with a model of politically motivated allocation, private recurring benefit programs contracted (resp. expanded) in villages redistricted to more competitive constituencies when bottom and upper tier governments were controlled by opposing (resp. same) parties. The resulting changes in household benefit flows help predict household political support, which in turn rationalize the inter-village targeting patterns. The results illustrate the tendency for political parties to manipulate transfers across constituencies in the absence of formula-based grants to local governments, and more generally for political incentives to focus on delivery of short-term private benefits rather than one-time benefits or public goods consistent with theories of political clientelism.

JEL-codes: H40 H75 H76 O10 P48 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-dev, nep-pol and nep-ure
Date: 2018-12
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