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Social and Behavioral Sciences Commons

Open Access. Powered by Scholars. Published by Universities.®

2012

Dartmouth College

Industrial Organization

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Sweetening The Deal? Political Connections And Sugar Mills In India, Sandip Sukhtankar Jul 2012

Sweetening The Deal? Political Connections And Sugar Mills In India, Sandip Sukhtankar

Open Dartmouth: Faculty Open Access Scholarship

Political control of firms is prevalent across the world. Evidence suggests that firms profit from political connections, and politicians derive benefit from control over firms. This paper investigates an alternative mechanism through which politicians may benefit electorally from connected firms, examining sugar mills in India. I find evidence of embezzlement in politically controlled mills during election years, reflected in lower prices paid to farmers for cane. This result complements the literature on political cycles by demonstrating how campaign funds are raised rather than used. Politicians may recompense farmers upon getting elected, possibly explaining how they can get away with pilferage ...