Political favoritism affects the allocation of government resources, but is it consequential for growth? Using a close election regression discontinuity design and data from India, we measure the local economic impact of being represented by a politician in the ruling party. Favoritism leads to higher private sector employment, higher share prices of firms, and increased output as measured by night lights; the three effects are similar and economically substantive. Finally, we present evidence that politicians influence firms primarily through control over the implementation of regulation.
"Politics and Local Economic Growth: Evidence from India."
American Economic Journal: Applied Economics,
Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior
Economics of Regulation
Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
Institutions and Growth
Regional Economic Activity: Growth, Development, Environmental Issues, and Changes