DP11377 Electoral Accountability and the Natural Resource Curse: Theory and Evidence from India
Does secession yield economic dividends for natural resource rich regions? We exploit the formation
of new Indian states in 2001 to uncover the effects of political secession on the comparative economic
performance of natural resource rich and natural resource poor areas. We show that resource rich areas
fare comparatively worse within the new states. Since the management and control of extraction rights
in the Indian context resides with state-level institutions, we argue that these patterns reflect effects of
political reorganisation on the quality of state governance in relation to natural resources. We describe a
model of collusion between state politicians and local natural resource rent recipients that can account
for the relationships we see in the data on how natural resource abundance shapes post-breakup local
economic outcomes.
