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American Economic Journal: Applied Economics: Vol. 4 No. 3 (July 2012)

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Sweetening the Deal? Political Connections and Sugar Mills in India

Article Citation

Sukhtankar, Sandip. 2012. "Sweetening the Deal? Political Connections and Sugar Mills in India." American Economic Journal: Applied Economics, 4(3): 43-63.

DOI: 10.1257/app.4.3.43

Abstract

Political control of firms is prevalent across the world. Evidence suggests that firms profit from political connections, and politicians derive benefit from control over firms. This paper investigates an alternative mechanism through which politicians may benefit electorally from connected firms, examining sugar mills in India. I find evidence of embezzlement in politically controlled mills during election years, reflected in lower prices paid to farmers for cane. This result complements the literature on political cycles by demonstrating how campaign funds are raised rather than used. Politicians may recompense farmers upon getting elected, possibly explaining how they can get away with pilferage. (JEL D72, G34, L66, O13, O17, Q12, Q13)

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Authors

Sukhtankar, Sandip (Dartmouth College)

JEL Classifications

D72: Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
G34: Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
L66: Food; Beverages; Cosmetics; Tobacco; Wine and Spirits
O13: Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
Q12: Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
Q13: Agricultural Markets and Marketing; Cooperatives; Agribusiness

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