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  • 2008
  • Working Paper
  • HBS Working Paper Series

Fixing Market Failures or Fixing Elections? Agricultural Credit in India

By: Shawn A. Cole
  • Format:Print
  • | Language:English
  • | Pages:50
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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 non-election 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.

Keywords

Agribusiness; Banks and Banking; Financing and Loans; Political Elections; State Ownership; Banking Industry; India

Citation

Cole, Shawn A. "Fixing Market Failures or Fixing Elections? Agricultural Credit in India." Harvard Business School Working Paper, No. 09-001, July 2008.
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About The Author

Shawn A. Cole

Finance
→More Publications

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More from the Author
  • What Do Impact Investors Do Differently? By: Shawn A. Cole, Leslie Jeng, Josh Lerner, Natalia Rigol and Benjamin N. Roth
  • Can Gambling Increase Savings? Empirical Evidence on Prize-Linked Savings Accounts By: Shawn A. Cole, Benjamin Iverson and Peter Tufano
  • Engine No. 1: An Impact Investing Firm Engages with ExxonMobil By: Mark Kramer, Shawn Cole, Vikram S. Gandhi and T. Robert Zochowski
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