APPLIED MICRO: Professor Jean-Robert Tyran (University of Vienna)

Votes (not) for sale

We document that “cash for votes” (C4V) is pervasive in Tamil Nadu (TN), India, and argue that it undermines democratic accountability. Survey data from voters and politicians show that TN is stuck in a bad equilibrium: voters have high prior beliefs about candidate corruption, expect politicians to offer cash, parties distribute it to mobilize support, and candidates who can raise large sums are favored, entrenching corruption. Using a natural experiment created by an arbitrary border with neighboring Kerala, we show that Kerala has coordinated on a more efficient equilibrium without C4V. There, low prior beliefs about corruption make cash offers signal corrupt intent, leading parties to refrain from C4V and less corrupt candidates to self-select into politics. Our spatial discontinuity design highlights voter beliefs—rather than reciprocity alone—as the key mechanism sustaining C4V.