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Globalization Shocks and Ethnic Politics: Evidence from India’s Trade Liberalization and the Emergence of Caste-Based Parties

  • Economics Discussion Papers
  • June 3, 2024
  • Abhay Aneja, Pavel Chakraborty, S.K Ritadhi

Do globalization shocks affect ethnic politics? We examine this question in the context of India's extensive but unanticipated trade liberalization episode in 1991, and study the rise of caste-based parties. We combine industry-level tariffs with pre-liberalization employment patterns across districts to determine regional exposure to tariffs before and after trade liberalization. Our empirical findings show that regions facing larger declines in trade protection witnessed higher electoral support for caste-based parties. The increase in popular support for caste-based parties was concentrated in areas with low urbanization, low educational attainment, and a larger concentration of historically marginalized ``low caste'' citizens. Examining mechanisms, we find that conditional on the loss in trade protection, wages were significantly lower for rural workers, non-secondary educated workers, and workers hailing from marginalized caste groups. The empirical findings are consistent with the explanation that the adverse effects of trade liberalization were disproportionately borne by historically marginalized citizens, who in turn voted for parties exclusively championing their interests.

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