Insiders and Outsiders: Local Ethnic Politics and Public Goods Provision

64 Pages Posted: 16 Nov 2015

See all articles by Kaivan D. Munshi

Kaivan D. Munshi

Brown University - Department of Economics

Mark R. Rosenzweig

Yale University - Economic Growth Center; Yale University - Cowles Foundation

Date Written: November 2015

Abstract

We examine the role of ethnic politics at the local level in supplying public goods within a framework that incorporates two sides to ethnic groups: an inclusionary side associated with internal cooperation and an exclusionary side associated with the disregard for others. The inclusionary aspect of ethnic politics results in the selection of more able political representatives who exert more effort, resulting in an increased supply of non-excludable public goods. The exclusionary aspect of ethnic politics results in the capture of targetable public resources by insiders; i.e. the representative's own group, at the expense of outsiders. Using newly available Indian data, covering all the major states over three election terms at the most local (ward) level, we provide empirical evidence that is consistent with both sides of ethnic politics. Counterfactual simulations using structural estimates of the model are used to quantify the impact of alternative policies that, based on our theory and the empirical results, are expected to increase the supply of public goods.

Suggested Citation

Munshi, Kaivan D. and Rosenzweig, Mark Richard, Insiders and Outsiders: Local Ethnic Politics and Public Goods Provision (November 2015). NBER Working Paper No. w21720. Available at SSRN: https://ssrn.com/abstract=2691238

Kaivan D. Munshi (Contact Author)

Brown University - Department of Economics ( email )

64 Waterman Street
Box B
Providence, RI 02912
United States
401-863-9331 (Phone)
401-863-1970 (Fax)

Mark Richard Rosenzweig

Yale University - Economic Growth Center ( email )

Box 208269
New Haven, CT 06520-8269
United States
203-432-3620 (Phone)

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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