Events

Prof. Francesco D’Acunto
A. James Clark Chair in Global Real Estate
Provost Distinguished Associate Professor
McDonough School of Business
Georgetown University

We show that the take up of a large-scale Indian loan-guarantee program for firm financing, Mudra loans, diverged across electoral districts with high and low support for the ruling party (“partisanship”) but only months after the widely-advertised program’s launch, once rulers and the media started to relate program take-up rates to party success. In loan-level administrative data, borrowers’ risk, interest rates, subsequent default rates, and access to bank branches do not explain the differential change in take up by partisanship. Regular-loan issuance, which captures the local demand and supply of credit purged of partisan cues, did not vary with partisanship. The effects were larger in more contested districts and for firms run by more partisan demographics. Partisan cues in fiscal policy communication can increase program take up beyond the costs and benefits of participation.