Pushkar Maitra (Monash University)

The Relevant Third

Résumé

Using a new measure of political competition (threat of coalition), we examine the impact of political competition on economic development in a multi-party setting with a first-past-the-post voting rule. We define a constituency as competitive when the vote share of the third-ranked candidate exceeds the winning margin. Using data from Indian Legislative Assembly elections and a regression discontinuity (RD) design, we show that constituencies with a barely `relevant' third witness a 1.2---3.5 percentage points increase in nightlights (our measure of economic development), which corresponds to an overall 5.5% growth premium. The main mechanisms are increased availability of public goods and a reduction in reported crime. We rule out other channels by showing that there is no effect when the threat of coalition is not credible.

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