Politics Off the Grid : Political Competition , Regulatory Control , and Allocation of Natural Resources ∗

How does political competition shape legislative influence over regulatory decision making? This study shows that in a democracy with pervasive patronage politics, political competition can undermine the strengthening of regulations due to heightened incentives to influence regulators. We propose a probabilistic voting model in which politicians compete for parliamentary seats by promising greater access to a scarce, centrally regulated resource. We show that when regulation is strengthened, the allocative distortion resulting from political competition is larger in constituencies (1) with closely contested elections, (2) where the resource has higher marginal benefit for voters, (3) and where costs of resource extraction are lower. We empirically test these predictions by examining groundwater extraction and the allocation of electricity needed to power irrigation pumps in India, the world’s largest democracy. Using nationally representative groundwater and “night lights” data, we find strong evidence for our theoretical predictions.