Fiscal Incentives for Conflict: Evidence from India's Red Corridor

Jacob Shapiro (1) , Oliver Vanden Eynde (2, 3)

1 Princeton University
2 PSE - Paris School of Economics
3 PJSE - Paris Jourdan Sciences Economiques

Can tax regimes shape the incentives to engage in armed conflict? Indian mining royalties benefit 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 valorem tax 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 important iron ore deposits. The royalty increase was also followed by an increase in illegal mining activity in iron mines.

Mots clés: Natural Resources; Civil Conflict; Counterinsurgency

Domaines: Economies et finances

Jacob Shapiro, Oliver Vanden Eynde. Fiscal Incentives for Conflict: Evidence from India's Red Corridor. Review of Economics and Statistics, 2023, 105 (1), pp.217-225. ⟨10.1162/rest_a_01039⟩. ⟨halshs-03325898⟩