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The Relevant Third: Threat of Coalition and Economic Development

Author

Listed:
  • Somdeep Chatterjee

    (Economics Group, Indian Institute of Management Calcutta)

  • Pushkar Maitra

    (Department of Economics, Monash University)

  • Manhar Manchanda

    (Economics Group, Indian Institute of Management Calcutta)

Abstract

We examine the impact of political competition on economic development in a multi-party setting by constructing a novel measure of competition: threat of coalition. We define a constituency as competitive when there is a ‘relevant’ third-position candidate, i.e., the ex-post vote share of the third-ranked candidate exceeds the winning margin. Using data on Indian Legislative Assembly elections and a regression discontinuity (RD) design we show that constituencies with a barely ‘relevant’ third witness a 1.2—3.3 percentage points increase in nightlights (our measure of economic development). The main mechanisms are higher availability of public goods and a reduction in reported crime in constituencies with a relevant third. We rule out other channels by showing that there is no effect when the threat of coalition is not credible.

Suggested Citation

  • Somdeep Chatterjee & Pushkar Maitra & Manhar Manchanda, 2024. "The Relevant Third: Threat of Coalition and Economic Development," Monash Economics Working Papers 2024-13, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2024-13
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    More about this item

    Keywords

    Collusion; Development; Vote Shares; Political Competition; Relevant Third;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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