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Sourav Sinha   Referee Report

Politics and Public Goods in Developing Countries: Evidence from theAssassination of Rajiv Gandhi (2015)

The paper attempts to estimate the effect of party ideology on policy outcomes, more specifi-

cally, provision of a wide range of public goods in the Indian context. It exploits the 1991 assassi-nation of Rajiv Gandhi, the then leader of the opposition Congress party, to generate exogenousvariation in party representation in the second round of voting in the 1991 national elections.Given the historical perception of Congress’s ‘pro-poor’ political ideology and the interest groupstargeted by the other contending parties, the author estimates that Congress party representa-tion had a significantly positive impact on the provision of pro-poor public goods in the followingdecade, and a significantly negative effect on non pro-poor public goods.

While previous research on developing countries has focused on the effect of parties on alloca-tion of a single public good, this paper looks at an array of public goods and their provision. Italso claims to identify the margin of victory as a significant determinant of public goods provision,

thus departing from traditional regression discontinuity approaches.

The interpretation of the coefficient  ψ, which the author claims to be the differential effect of Congress representation on the same pro-poor public good representation, is incorrect. In thesame constituency and for the same pro-poor public good, the differential effect of Congress partyis (ρ+ψ). The author should test for the joint significance of (ρ+ψ). Given the estimate values of ρ  and  ψ   in Table.4 and also in Table.7 (especially for the Bardhan and Mukherjee classificationand non-incumbents), it is highly unlikely that the author will find any significance of Congressparty representation.

The author claims that victory margin is an important signal to politicians about popular demandsof public goods and close elections will result in insignificant estimates because of convergence inpolicy platforms. If that is really the case, then the author should have backed his claim by esti-mating the effect of margin in his regression results. Controlling for the margin only captures theparty identity effect at any given margin. However margin could have two conflicting effects onpublic goods provision. A higher margin could signal greater demand for pro-poor public goodsand therefore induce the Congress party to implement provision because of re-election incentives.A higher margin, could however, also signal a weaker, if not non-existent opposition, which couldinduce higher provision of non pro-poor public goods, which are presumably more profitable forpersonal gains to politicians. An insignificant coefficient on the margin would mean that partyrepresentation should not have any different effect than that for the RD. To capture the margin

effect more precisely, the author should divide the positive margin into exhaustive classes. If thetwo conflicting channels are operative, lower margin classes would capture the first effect, whilehigher margins would capture both.

The author takes the normalized proportion of villages in each constituency as the dependentvariable. It is a better strategy to look at the composition of the constituency budget, morespecifically the proportion of budget allocated for pro-poor goods, because it captures the inten-sive margin of Congress effect. Given the paucity of constituency level data, disaggregated at

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goods level, such analysis however might be infeasible.

The Bardhan and Mookherjee (2011) paper categorizes public goods in the context of West Bengal.It is not clear why this classification should hold for other states as well, especially if the baseline

provisions are different across states. Even if we do believe that the Bardhan and Mookherjeeclassification is generalizable across states, the author does not explain why the effect of Congressrepresentation is pretty much restricted to provision of clean water facilities (see Table.5) and notpronounced for other pro-poor public goods as well.

A more pressing issue is the decade long gap between the 1991 elections and the 2001 census out-comes, with 3 national elections in between. It is not very convincing that the effect of Congressrepresentation in 1991 elections could be so persistent that effects are felt even after 10 years. Theelections in between were won by the BJP, a party allegedly aligned with the upper caste urbanHindus. Even if we discount the possibility that the BJP government did not have any significant

effect on pro-poor public good provision in the intervening years 1996-2001, they could still havehad a significantly positive effect on non-pro-poor public goods, which would render the author’sestimates as a lower bound. The author claims that the central government was unstable after theelections of 1996 and 1998. This is all the more reason to believe that central government MPswould institute short-lived schemes because of re-election incentives, which could result in perverseprovision outcomes. This brings us to a second issue about the influence that central governmentMPs can yield on public goods provision, which in most cases is the state’s prerogative. MPLADSprograms with the annual grant of 10 million rupees, is a paltry sum in comparison to constituencybudgets, more so for larger constituencies. Most development programs brought in by politiciansto woo voters, tend to lose sheen after elections, more so for ones targeted at the marginalized,because there are other less costly channels for buying loyalty. All these concerns raise doubts

about how much a central government MP can really change the budgetary allocations to targetpro-poor schemes.

The author shows regression results for the heterogeneous impact of incumbency status on publicgoods provision. However, he does not offer any causal mechanism or for that matter any explana-tion on why specific non-pro poor public goods should decline under incumbents and others undernon-incumbents. Moreover, the author claims decline in some of the non-pro poor public goods.Decline would suggest that over time these goods were not allocated sufficient funds to at leastsustain their initial levels. This is all the more reason to look at the composition of the budget andhow it changes rather than just the proportion of villages. The incumbency effects on pro-poorpublic goods are insightful, because they prove that the increased provision is not attributableto non-incumbent Congress representatives only, but across the party, thus strengthening partyideology influences. It would be interesting to tease out the differential effects of incumbency andmargin of victory by classes.

The author has incorrectly indexed both states and constituencies by the same   i   in all specifi-cations. While the author tries to capture political ideology effects in a very innovative way, thepaper raises serious concerns in the identification strategy, the time lag, and the missing effect of margin of victory.