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

Pre-print, Working paper: 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 counter-insurgency 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.

Author(s)

Jacob N Shapiro, Oliver Vanden Eynde

Date of publication
  • 2020
Keywords JEL
D72 D74 L23
Keywords
  • Counterinsurgency
  • Civil Conflict
  • Public Goods Provision
Internal reference
  • PSE Working Papers n°2020-50
Version
  • 2