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Fiscal incentives for conflict: Evidence from India’s Red Corridor

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  • Shapiro, Jacob N.
  • Vanden Eynde, Oliver

Abstract

Can tax regimes shape the incentives to engage in armed conflict? Indian mining royaltiesbenefit the States, but are set by the central government. India's Maoist belt is mineral-rich, and States are responsible for counterinsurgency operations. We exploit the introduction of a 10% ad valoremvtax on iron ore that increased royalty collections of the affected states by a factor of 10. We find that the royalty hike was followed by a significant intensification of violence in districts with importantiron ore deposits. The royalty increase was also followed by an increase in illegal mining activity in iron mines.

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  • Shapiro, Jacob N. & Vanden Eynde, Oliver, 2021. "Fiscal incentives for conflict: Evidence from India’s Red Corridor," CEPREMAP Working Papers (Docweb) 2102, CEPREMAP.
    • Handle: RePEc:cpm:docweb:2102
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    Cited by:

    1. Saavedra, Santiago & Romero, Mauricio, 2021. "Local incentives and national tax evasion: The response of illegal mining to a tax reform in Colombia," European Economic Review, Elsevier, vol. 138(C).
    2. Downey, Mitch, 2021. "Did the war on terror deter ungoverned spaces? Not in Africa," Journal of Development Economics, Elsevier, vol. 151(C).

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    Keywords

    Counterinsurgency; Civil Conflict; Natural Resources;
    All these keywords.

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