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.
Wednesday, January 28, 2009
New AEA Journals
This year the American Economic Association is switching from publishing three journals to publishing four. A couple of days ago I received my first copy of one of the new journals, the American Economic Journal: Applied Economics (TOC). It is generally being met with positive reviews and several articles look promising (there are some heavywieght authors, like Michael Kremer, so it should be good). Here is the TOC for the new macroeconomics journal. Here is one favorable mention about a new public choice paper looking at capture in india: