Working Paper: NBER ID: w21720
Authors: Kaivan Munshi; Mark Rosenzweig
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.
Keywords: Ethnic Politics; Public Goods; Local Governance; Welfare Transfers; India
JEL Codes: H11; H4; H41; H42; O1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| inclusionary aspect of ethnic politics (J15) | selection of more competent political representatives (D72) |
| selection of more competent political representatives (D72) | supply of nonexcludable public goods (H49) |
| exclusionary aspect of ethnic politics (J15) | targeting of welfare transfers to insiders (H53) |
| targeting of welfare transfers to insiders (H53) | systematic crowding out of outsiders from these benefits (J68) |
| population share of the most numerous eligible caste crosses a threshold (J15) | discontinuous increase in elected representative's ability (D72) |
| population share of the most numerous eligible caste crosses a threshold (J15) | supply of public goods (H40) |