Building connections: Political corruption and road construction in India

Politically-driven corruption is a pervasive challenge for development, but evidence of its welfare effects are scarce. Using data from a major rural road construction programme in India we document political influence in a setting where politicians have no official role in contracting decisions. Exploiting close elections to identify the causal effect of coming to power, we show that the share of contractors whose name matches that of the winning politician increases by 83% (from 4% to 7%) in the term after a close election compared to the term before. Regression discontinuity estimates at the road level show that political interference raises the cost of road construction and increases the likelihood that roads go missing.