Quid Pro Quo: Builders, Politicians, and Election Finance in India- Working Paper 276

Devesh Kapur

No 276, Working Papers from Center for Global Development

Abstract: In developing countries where elections are costly and accountability mechanisms weak, politicians often turn to illicit means of financing campaigns. This paper examines one such channel of illicit campaign finance: India’s real estate sector. Politicians and builders allegedly engage in a quid pro quo, whereby the former park their illicit assets with the latter, and the latter rely on the former for favorable dispensation. At election time, however, builders need to re-route funds to politicians as a form of indirect election finance. One observable implication is that the demand for cement, the indispensible raw material used in the sector, should contract during elections since builders need to inject funds into campaigns. Using a novel monthly-level data set, we demonstrate that cement consumption does exhibit a political business cycle consistent with our hypothesis. Additional tests provide confidence in the robustness and interpretation of our findings.

Keywords: elections; election finance; corruption; political economy; India (search for similar items in EconPapers)
JEL-codes: D72 E32 P16 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2011-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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