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Quid Pro Quo: Builders, Politicians, and Election Finance in India

33 Pages Posted: 16 Dec 2011 Last revised: 3 Nov 2015

Devesh Kapur

University of Pennsylvania - Center for the Advanced Study of India; Center for Global Development

Milan Vaishnav

Carnegie Endowment for International Peace

Date Written: March 29, 2013

Abstract

Where elections are costly but accountability mechanisms are weak, politicians often turn to private firms for illicit election finance. Where firms are highly regulated, politicians can exchange policy discretion or regulatory forbearance for bribes and monetary transfers from firms. Due to its regulatory intensity, we focus on the role of the construction sector. Specifically, we argue that builders will experience a short-term liquidity crunch as elections approach because of their need to re-route funds to politicians as a form of indirect election finance. We use variation in the demand for cement to investigate the presence of an electoral cycle in building activity in India consistent with this logic. Using a novel monthly-level dataset, we demonstrate that cement consumption does exhibit a political business cycle consistent with our hypothesis. Additional tests provide confidence in the robustness and interpretation of our findings.

Keywords: elections, election finance, corruption, political economy, India

JEL Classification: P16, D72, E32

Suggested Citation

Kapur, Devesh and Vaishnav, Milan, Quid Pro Quo: Builders, Politicians, and Election Finance in India (March 29, 2013). Center for Global Development Working Paper No. 276. Available at SSRN: https://ssrn.com/abstract=1972987 or http://dx.doi.org/10.2139/ssrn.1972987

Devesh Kapur (Contact Author)

University of Pennsylvania - Center for the Advanced Study of India ( email )

Philadelphia, PA 19104
United States

HOME PAGE: http://www.sas.upenn.edu/casi/about/devesh.html

Center for Global Development

2055 L St. NW
5th floor
Washington, DC 20036
United States

Milan Vaishnav

Carnegie Endowment for International Peace ( email )

1779 Massachusetts Avenue, NW
Washington, DC 20036
United States

HOME PAGE: http://milanvaishnav.com

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