Conflicts and Consumption: Evidence from India
Co-authored with Rohan Gudibande (KREA) and Abhishek Shaw (APU)
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Abstract:
We study household consumption responses to political conflict over land acquisition in India. Combining six quasi-natural experiments with monthly household panel data, we show that consumption rises sharply following conflicts centered on demands for higher monetary compensation, but does not change when conflicts occur but demands are non-monetary. Surprisingly, the increase occurs despite no corresponding rise in income or employment. Borrowing shows more complex heterogeneous effects. We interpret these findings as anticipatory consumption responses to expected future state transfers under political renegotiation. The results identify a novel channel through which political conflict affects household behavior: asymmetric upside expectations regarding future compensation can generate expansionary consumption responses to uncertainty.
Bio:
https://www.iima.ac.in/faculty-research/faculty-directory/anindya-chakrabarti