The economic consequences of accused politicians in India

Nishith Prakash, Marc Rockmore, Yogesh Uppal

17 December 2015

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Despite a history of widely contested and transparent elections, and the presence of a vibrant and open media, India is electing an increasing number of politicians facing criminal charges. This share has risen from 24% of members of the Indian Parliament in 2004 to 34% in 2014 (New York Times 2014). While the election of criminally accused candidates to public office is concerning in any context, it is especially so for India. Large quantities of funds are distributed by the government through a wide variety of interventions and programmes, which have been plagued by costly scandals with losses in the hundreds of billions of dollars (Sukhtankar and Vaishnav 2015). A severely understaffed judiciary and police force, resulting in an extremely slow judicial system, exacerbate this problem. Taken together, these realities create a context in which an influx of criminally accused politicians could be especially costly for an economy.

Using information on the charges filed against candidates, we estimate the causal effect of electing criminally accused politicians to the State Assembly on the subsequent economic activity in their constituency. In particular, we focus on elections in 20 Indian states during the 2004 to 2008 period. Since economic data are not systematically available for constituencies, we rely on satellite data on the intensity of night-lights. These data have been increasingly used to proxy for economic growth, as studies find a strong relationship between GDP and night-light intensity at the sub-national level (Bleakley and Lin 2012, Henderson et al. 2012, Hodler and Rashky 2014, Storeygard 2014). Figures 1 (a) and (b) show the strong relation between growth and night lights. Figure 1 (a) shows India in 1992 at the time of the economic reforms, while Figure 1 (b) shows India after the resultant high levels of growth – not only has the intensity of night lights increased, but new areas are lit due to the spread of electricity and economic gains.

Figure 1 (a). Night-time light output in India in 1992

Figure 1 (b). Night-time light output in India in 2009

Do accused politicians impact economic activity?

We answer this question by comparing constituencies that elect criminally accused politicians with those that elect non-accused politicians in similarly close elections. We find that the election of an accused politician leads, on average, to roughly a 22 percentage point lower yearly growth in the intensity of night lights. Based on conversions between GDP and night lights, this is roughly 5.61% to 5.86% GDP growth per year (as compared to the 6% otherwise).

Overall, these results highlight the high aggregate economic costs of electing lower quality politicians (i.e. criminally accused) and point to likely significant individual costs in foregone access to public services.

Do all accusations have a similar impact?

We next examine whether the type of charges and the number of accusations have a differential impact on our measure of economic activity? We find a strong negative effect of electing politicians accused of financial or serious charges. In contrast, politicians who are only accused of either non-financial or non-serious charges do not have a negative impact on economic outcomes. We also find that the size of the negative effect increases with the number of underlying accusations. These results show that the specific accusations and charges matter, and the costs increase with the severity of the accusation.

When do these costs develop?

While electing accused politicians leads to a 22 percentage point lower yearly growth of night lights, this effect is not instantaneous. When we examine the accumulation of these costs, we find that the effects only appear in the later years of the politician’s term. There is no apparent effect in the initial years. We believe that this is explained by the need for politicians to collaborate with local bureaucrats to engage in corrupt activity (Iyer and Mani 2012). After elections, bureaucrats frequently change positions so it takes a certain amount of time for corruption politicians and bureaucrats to identify each other. Additionally, the effects of neglected public infrastructure, such as roads, may take some time to slow down economic activity.

How does this happen?

While it is difficult to pinpoint the exact causes, the evidence suggests that the local context matters. When we compare the effects of electing accused politicians, we find that these costs increase in states with high corruption levels and lower levels of development, and those that plausibly have weaker institutions. This variation across states suggests that the local context plays an important role in limiting the detrimental effect of electing accused politicians. More broadly, since high corruption levels, low levels of development, and weak institutions frequently occur in the same places, it is difficult to separate their effects.

Public service delivery: Road construction

We focus on road construction as an example of public service delivery. Road construction often involves corruption through the manipulation of the tenders and the process of procurement. Using data from a national road construction scheme, the Pradhan Mantri Gram Sadak Yojana, we find that the number of incomplete road projects increases in constituencies represented by criminally accused candidates. Once again, the negative impact is driven by candidates who are accused of serious and financial charges throughout India.1

Converting from night lights to GDP

While the satellite data on night light intensity clearly show a cost to electing accused politicians, GDP is typically used to measure growth. Using estimates from the literature, we convert our estimates into rough measures of GDP costs and find estimates ranging from 2.3 to 6.5 percentage point lower GDP growth per year for our main result. To put this into perspective, India experienced very high growth during this period, ranging from 7.9% in 2003 to 9.8% in 2007. Using a more conservative estimate of 6% GDP growth as a measure of the average yearly constituency growth, this would imply that, on average, electing an accused candidate would result in 5.61% to 5.86% GDP growth per year (as compared to the 6% otherwise). Since this is a yearly estimate, this would compound over the entire term.

The big picture

Although our research focuses on accused politicians, we believe that this reflects a broader problem of lower quality politicians. More specifically, our findings are consistent with the literature on patronage democracies. One manifestation of a patronage democracy is the election of politicians who are able and willing to provide targeted benefits (Burgess et al. 2015). The benefits could be targeted based on caste, class or ethnicity. India is notable for its caste politics (Chandra 2004). Therefore, instead of focusing on the overall outcomes (such as the delivery of public goods), voters focus on whether politicians can deliver targeted transfers to their specific group or caste. Not only are voters perhaps more likely to overlook accusations, but these accusations might serve as a signal of the politician's willingness to use the office to reward fellow group members (Chauchard 2014, Wade 1985).

If true, our results suggest three consequences. First, this can result in the election of criminally accused candidates, and therefore potentially explains the ever-increasing number of accused politicians who are elected in India. Second, the election of lower quality candidates in patronage democracies leads to lower aggregate growth. Third, these effects, however, are mediated by the local context (especially the institutional and legal context). In the more developed, and less corrupt states in our sample, the effects of the accused politicians were lower, perhaps due to the strength of institutions. Although we study a particular context, lower quality politicians are believed to be pervasive in many developing countries. While the underlying cause is often context-specific and may range from caste politics to tribal and ethnic voting, we believe that our analysis is suggestive for other contexts.

References

Bleakley, H and J Lin (2012), “Portage and Path Dependence”, The Quarterly Journal of Economics, 127: 587-644.

Burgess, R, R Jedwab, E Miguel, A Morjaria, and G Padro i Miquel (2015), “The Value of Democracy: Evidence from Road Building in Kenya”, American Economic Review 105 (6): 1817-51.

Chauchard, S (2014), “Is ‘Ethnic Politics’ Responsible for ‘Criminal Politics’?, A Vignette Experiment in North India”, Working Paper.

Henderson, J V, A Storeygard, and D N Weil (2012), “Measuring Economic Growth from Outer Space”, American Economic Review 102(2): 994-1028.

Hodler, R and P A Raschkyl (2014), “Regional Favoritism”, Quarterly Journal of Economics 124(2): 995-1033.

Iyer, L, and A Mani (2012), “Traveling Agents: Political Change and Bureaucratic Turnover in India”, The Review of Economics and Statistics 94(3): 723-739.

Prakash, N, M Rockmore, and Y Uppal (2015), “Do Criminally Accused Politicians Affect Economic Outcomes? Evidence from India”, Working Paper.

Sukhtankar, S, and M Vaishnav (2015), “Corruption in India: Bridging Research Evidence and Policy Options”, Brookings-NCAER India Policy Forum 2014.

Storeygard, A (2014), “Farther on Down the Road: Transport Costs, Trade and Urban Growth in Sub-Saharan Africa”, Working Paper.

Wade, R (1982), “The System of Administrative and Political corruption: Canal Irrigation in South India”, Journal of Development Studies 18(3): 287-328.

Footnote

1 Specifically, in constituencies belonging to ‘BIMAROU’, ‘Least Developed’ and ‘High Corrupt’ states in India.

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Topics:  Development Politics and economics

Tags:  India, roads, Corruption, lighting, street lights

Assistant Professor of Economics, University of Connecticut, Storrs.

Assistant Professor of Economics, Clark University; Research Affiliate, Households in Conflict Network

Associate Professor of Economics, Youngstown State University

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