American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
Fixing Market Failures or Fixing Elections? Agricultural Credit in India
American Economic Journal: Applied Economics
vol. 1,
no. 1, January 2009
(pp. 219–50)
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)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.1.1.219Additional Materials
JEL Classification
- 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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