We study the economic effects of local democracy, exploiting a natural experiment in Karnataka, India. The COVID-induced suspension of elections generated quasi-random variation in democratic rule, as villages whose elected leader completed their term in 2020 had bureaucrats appointed to govern them throughout the pandemic. We find that local democracy aligns spending more with citizen preferences, but is less responsive to the preferences of disadvantaged groups. Elected leaders are more responsive to citizen needs and cause local bureaucrats to exert more effort. Appointed administrators perform better on aspects of governance that require the specialised skills they possess. Local democracy improves governance in some domains, but has no overall impact on local economic growth.

Written with Abhishek Arora (Harvard), Siddharth George (NUS), Vijayendra Rao (World Bank), MR Sharan (Maryland)