Taxation and Political Mobilization: Evidence from Andhra Pradesh

Abstract

AbstractThis article empirically investigates whether there are differences in a region’s taxation burden on the basis of support for the centralized state government in the Indian state of Andhra Pradesh. Using randomness introduced by close election outcomes, this article finds that the government collected less tax revenues where opposition parties were more successful. The decline in tax revenue was most likely targeted at agricultural producers, and a similar pattern is found in other available agricultural policies. These results are consistent with a model in which it is optimal for a centralized government to catch up in elections it trails as opposed to bolstering existing leads. Furthermore, these results suggest that taxation responds to electoral pressures and that agricultural producers in particular are targeted during times of political competition.