Brown Bag Talk- Identity Politics, Targeted Redistribution And Private Investment: Evidence From India’S Silent Revolution
Speaker(s) Subrata Kumar Ritadhi Publication Reserve Bank of India, CAFRAL, Mezzanine floor, Main Building, Shahid Bhagat singh road, Fort, Mumbai 400001
ABSTRACT

This paper causally identifies the welfare gains emanating from increased democratic participation of socio-economically disadvantaged citizens in public policy. Exploiting a unique political setting in India, the paper measures democratic participation through the political mobilization of economically deprived low caste citizens resulting in the formation of caste-based political parties, exclusively representing the interests of low caste populations. Using the outcome of close elections between caste-based and mainstream parties as a source of quasi-random variation, the paper shows that the marginal legislator from caste-based parties significantly increases the share of public resources allocated towards low caste citizens. Exploiting the existing institution of electoral quotas, the paper shows that low caste legislators elected through electoral quotas from caste-based parties allocate a significantly higher share of public expenditures towards low caste citizens as opposed to low caste legislators from mainstream national parties. The paper also identifies the potential costs associated with redistributive spending undertaken by fiscally constrained politicians. We first show that the increased welfare expenditures by caste-based parties is financed through a reduction in non-exclusive public goods which dampens regional inflows of private investment. (JEL Codes: H32, H53, H54, I38, J15, O12, O23, P16).


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