Abstract: We study how political competition affects economic development under a multi- party, first-past-the-post system, using a new measure of political competition — threat of coalition. A constituency is deemed competitive when the third- ranked candidate’s vote share exceeds the winning margin, i.e., when the third – ranked candidate is ‘relevant’. Focusing on Indian state elections and using a regression discontinuity approach, we find that constituencies with a ‘relevant’third witness a 1.3–3.6 percentage point increase in growth in luminosity density. As mechanisms, we find that the presence of Relevant Thirds is associated with higher availability of public goods and lower crime. We rule out alternative explanations by showing muted effects when the coalition threat is not credible.