The Effects of Political Reservations on Credit Access and Borrowing Composition - Evidence from India

Somdeep Chatterjee presents at the WIDER Seminar Series on 8 December.

Abstract

We estimate the impacts of mandated political reservations for minorities and historically disadvantaged communities on household credit access and borrowing behavior. To identify causal effects, we exploit the exogenous state-time variation in the allocation of constituencies (electoral districts) to the reserved categories for two minority groups in Indian states. Such variation is generated due to the institutional features of implementation of the mandated reservations and a large redistricting exercise that took place in 2008. Using a nationally representative household level panel data set with observations before and after the redistricting exercise, we find that the effect is concentrated mainly on the disadvantaged population groups. Reservation for Scheduled Tribes (STs) increases household probability of getting loans by 3.7 percentage points, while reservations for Scheduled Castes (SCs) does not seem to affect the likelihood of getting a loan. However, conditional on having a loan, reservation for SCs does lead to fewer but larger loans. We also find considerable changes in the patterns of household borrowing composition. The heterogeneous effects for SC and ST reservations are consistent with existing literature on the impacts of these reservations on other outcomes.

About the speaker

Somdeep Chatterjee is an Assistant Professor at the Indian Institute of Management. He has formerly been a Lecturer in Development Economics at the Global Development Institute (GDI) at the University of Manchester. He completed his PhD in Economics from the University of Houston and is currently also a Fellow of the Global Labor Organization (GLO). He is an empirically oriented development economist with allied research interests in the economics of human capital, gender, political economy, and agriculture. His research has appeared in journals such as the Journal of the European Economic Association, Economica, World Development, Public Choice, Journal of Human Capital etc. His works have also been featured in policy portals such as the IGC and Ideas for India and in many media outlets in various languages.

WIDER Seminar Series

The WIDER Seminar Series showcases the latest research on key topics in development economics. It provides a forum for senior and early-career researchers, both inhouse and external, to present recent and ongoing work related to UNU-WIDER’s current work programme.

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