Fixing Market Failures or Fixing Elections? Agricultural Credit in India
Shawn Cole
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| Article Citation |
Cole, Shawn 2009. "Fixing Market Failures or Fixing Elections? Agricultural Credit in India." American Economic Journal: Applied Economics, 1(1): 219–50.
DOI:10.1257/app.1.1.219
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| 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)
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| Authors |
Cole, Shawn (Harvard U)
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| JEL Classifications |
D72: Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
O13: Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
Q14: Agricultural Finance
Q18: Agricultural Policy; Food Policy
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