Indirect rule and public goods provision: evidence from colonial India

Abstract This paper contributes to the conflicting literature about indirect rule by delivering a new theoretical explanation for the persistent effects of indirect rule on contemporary provision of public goods. It looks at a single region of India which has areas that historically experienced both direct and indirect rule. The theoretical mechanism focuses on the principal-agent problem and the incentives that it produces for local leaders. Unlike local princes, colonizers were under stricter oversight and had to be more accountable to the top due to the obligations to extract resources. A spatial regression discontinuity design is used to compare directly and indirectly ruled territories. The empirical results show that indirect rule has predominantly long-term negative effects on the provision of selected public goods.