Author: Cole, Shawn

Source: American Economic Journal: Applied Economics, Volume 1, Number 1, January 2009 , pp. 219-250(32)

Publisher: American Economic Association

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.

Document Type: Research article

DOI: http://dx.doi.org/10.1257/app.1.1.219

Publication date: 2009-01-01

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