Building networks: Investigating the quid pro quo between local politicians & developers

 From Alex Tabarrok.

"My latest paper, Building Networks, is with Vaidehi Tandel and Sahil Gandhi in the Journal of Development Economics. We look at the connection between politics and land markets in Mumbai, India. The subject is inherently difficult to analyze because most such connections are illicit and under the table. What we find, however, is that when the local politician loses power development projects slow down which suggests that it takes time to build the connections that are necessary to speed approval through the bureaucratic process. Much more in the paper.

Abstract: Mutually beneficial arrangements between politicians and real estate developers are common in many developing countries. We document what happens when the politician-developer nexus is disrupted by an election. We construct a novel dataset of real estate projects and electoral constituencies in Mumbai’s municipal government. We find that an incumbent party losing the election increases real estate project completion times by 5%. We find no effect of quasi-random redistricting or changes in voter preferences on project delays. We investigate two mechanisms for the slowdown associated with party turnover — delays in construction approvals around the time of the election and increase in litigation against projects after the election. While we see no rise in litigation, we find that delayed approvals near an election explain 23% of the increased total delays due to party change."