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Research related to:  Political Economy

Shrinking dictators: how much economic growth can we attribute to national leaders?

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National leaders – especially autocratic ones - are often given credit for high average rates of economic growth while they are in office (and draw criticism for poor growth rates). Drawing on the literature assessing the performance of schoolteachers and a simple variance components model, we develop a new methodology to produce optimal (least squares) estimates of each leader’s contribution to economic growth. We find that even in the world where leaders affect growth, the average rate of growth during a leader’s tenure is mostly uninformative about that leader’s contribution to growth...

William Easterly and Steven Pennings

Political Turnover, Bureacratic Turnover, and the Quality of Public Services

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We study how political party turnover in mayoral elections in Brazil affects the provision of public education. Exploiting a regression discontinuity design for close elections, we find that municipalities with a new party in office have test scores that are 0.05-0.08 standard deviations lower than comparable municipalities with no change in the political party. 

Akhtari, Mitra, Diana Moreira, and Laura Trucco

Broken Cities: The Effect of Government Responsiveness on Citizens' Participation

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What is the impact of government responsiveness on citizens’ participation in local public goods provision? I explore whether government receptiveness to requests for maintenance work (e.g., sidewalk repairs, tree pruning) affects the likelihood that citizens will demand new government projects. I ran a field experiment in collaboration with the Government of the City of Buenos Aires that generated an exogenous increase in repairs of broken sidewalks reported by citizens. I find that when the government repairs sidewalks after citizens file complaints, other citizens are more likely to issue additional requests for public maintenance work.

Laura Trucco

Breaking Clientelism or Rewarding Incumbents? Evidence From an Urban Titling Program in Mexico

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Clientelism is common in developing countries, and often detrimentally affects political accountability and public good provision. However, little is known empirically about how clientelistic ties can be broken, particularly because policy reforms that could reduce voter dependence on incumbents for special favors may also cause voters to reward the reform's architects. 

Larreguy, Horacio, John Marshall, and Laura Trucco

Do Natural Resources Influence Who Comes to Power, and How?

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Do natural resources impair institutional outcomes? Existing work studies how natural resources influence the behavior of leaders in power. We study how they influence who comes to power. Our analysis focuses on oil price shocks and local democracy in Colombia, a country mired in civil conflict. We find that when the price of oil rises internationally, legislators affiliated with right-wing paramilitary groups win office more in oil-producing municipalities. These effects are larger in conflict-ridden locations, where armed groups are poised to intervene in local elections . . . 

Think Tanks

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This paper is the first to investigate the relationship between think tanks and economic policy empirically. We use panel data for the US states to examine state-based, free market (SBFM) think tanks’ relationship to eight key economic policy objectives. We find little evidence that SBFM think tanks are associated with more “pro-market” policies along the policy dimensions they aim to influence. However, we find stronger evidence that SBFM think tanks are associated with more “pro-market” citizen attitudes about the role of government vs. markets in economic policy. These results suggest that if think tanks’ connection to economic policy is important at all, its importance may be long term and operate via the channel of “ideas" . . . 
Peter T. Leeson, Matt E. Ryan and Claudia R. Williamson

Commercial Imperialism? Political Influence During the Cold War

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We provide evidence that increased political influence, arising from CIA interventions during the Cold War, was used to create a larger foreign market for American products. Following CIA interventions, imports from the US increased dramatically, while total exports to the US were unaffected. The surge in imports was concentrated in industries in which the US had a comparative disadvantage, not a comparative advantage. Our analysis is able to rule out decreased trade costs, changing political ideology, and an increase in US loans and grants as alternative explanations . . . 
Daniel Berger, William Easterly, Nathan Nunn, Shanker Satyanath

Democratic Transitions and Implicit Power: An Econometric Approach

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Recent works of political economy have emphasized the importance of distinguishing between transfers of explicit and implicit power over economic decision making in democratic transitions. Scholars have so far provided interesting anecdotal evidence supporting their claims of potential divergence between transfers of explicit and implicit power. In this paper we apply econometric techniques to examine if a transfer of explicit power has not also been accompanied by a transfer of implicit power. We do so in the context of a major country where considerable uncertainty remains over the military’s implicit role in economic decision making . . . 
Shanker Satyanath and Gokce Goktepe

Selling Out on the UN Security Council

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Election to the United Nations Security Council (UNSC) provides nations with an opportunity to trade policy support in exchange for aid and other forms of financial assistance. Nations elected to one of the ten temporary two year seats on the United Nations Security Council experience substantially lower economic growth during their time on the council than comparable nations not on the UNSC. Over the two year period of UNSC membership and the following two years, during which a nation is ineligible for reelection, UNSC nations experience a 3.5% contraction in their economy relative to nations not elected to the UNSC. Further, on average nations in the UNSC become less democratic and experience an increase in the level of restrictions on press freedom. The effects of UNSC membership on political and economic development are particularly strong in non-democratic states.
Alastair Smith, NYU and Bruce Bueno de Mesquita, NYU

Democratic Transitions and Implicit Power: An Econometric Approach

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Recent works of political economy have emphasized the importance of distinguishing between transfers of explicit and implicit power over economic decision making in democratic transition. Scholars have so far provided interesting anecdotal evidence supporting their claims of potential divergence between transfers of explicit and implicit power. This raises the question of whether it is possible to econometrically identify when a transfer of explicit power has not also been accompanied by a transfer of implicit power. This paper offers a straightforward and easily replicable approach to addressing this question using the tools of financial econometrics. We apply this approach here to a major country where considerable uncertainty remains over the military's implicit role in economic decision making long after an explicit transfer of power to elected leaders, namely Turkey. Our findings indicate a significant gap between the explicit and implicit aspects of Turkey's democratic transition, adding support to scholars' claims about the importance of distinguishing between these aspects of transitions.
Gokce Goktepe and Shanker Satyanath

Pivotal Patronage

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In contrast to traditional approaches to patronage politics, in which politician directly buy electoral support from individuals, we examine how patronage based parties can elicit wide spread electoral support by offering to allocate benefits to the precinct giving it the most support. Provided that the party can observe precinct level voting, this mechanism, which eliminates the need to observe individual votes or to reward a large number of individual voters, incentivizes voters to support a party even when the party enacts policies which are against their interests. When a party allocates rewards contingent upon precinct-level voting results, voters can be pivotal both in terms of affecting who wins the election and in influencing which precinct gets the benefits. The latter (prize pivotalness) dominates the former (outcome pivotalness), particular when a patronage party is anticipated to win. Competition between the precincts for prize pivotalness encourages rational voting even when the odds of outcome pivotalness approach 0.
Alastair Smith, NYU and Bruce Bueno de Mesquita, NYU

Can Informed Public Deliberation Overcome Clientelism? Experimental Evidence From Benin

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This paper provides experimental evidence on the effect of "informed" town hall meetings on electoral support for programmatic, non-clientelist platforms. The experiment takes place in Benin and involves real candidates running in the fi…rst round of the 2006 presidential elections. The treatment is a campaign strategy based exclusively on town hall meetings during which policy proposals made by candidates are "speci…c" and informed by empirical research. The control is the "standard" strategy based on campaign rallies followed by targeted or clientelist electoral promises . . . 
Leonard Wantchekon

Political Survival and Endogenous Institutional Change

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Incumbent political leaders risk deposition by challengers within the existing political rules and by revolutionary threats. Building on Bueno de Mesquita, Smith, Siverson, and Morrow’s selectorate theory, the model here examines the policy responses of office-seeking leaders to revolutionary threats. Whether leaders suppress public goods such as freedom of assembly and freedom of information to hinder the organizational ability of potential revolutionaries or appease potential revolutionaries by increasing the provision of public goods depends, in part, on the sources of government revenues. Empirical tests show that governments with access to revenue sources that require few labor inputs by the citizens, such as natural resource rents or foreign aid, reduce the provision of public goods and increase the odds of increased authoritarianism in the face of revolutionary pressures. In contrast without these sources of unearned revenues, governments respond to revolutionary pressures by increasing the provision of public goods and democratizing.
Bruce Bueno de Mesquita, NYU and Alastair Smith, NYU

Leader Survival, Revolutions and the Nature of Government Finance

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Leaders face multiple threats to their political survival. In additional to surviving the threats to tenure from within the existing political systems, which is modeled using Bueno de Mesquita et al’s (2003) selectorate theory, leaders risk being deposed through revolutions and coups. To ameliorate the threat of revolution, leaders can either increase public goods provisions to buy off potential revolutionaries or contract the provision of those public goods, such as freedom of assembly, transparency and free press, which enable revolutionaries to coordinate. Which response a leader chooses depends upon existing institutions and the structure of government finances . . . 
Alastair Smith, NYU and Bruce Bueno de Mesquita, NYU

Tanzania's Economic and Political Performance: A District-Level Test of Selectorate Theory

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Hypotheses derived from the selectorate theory of political survival are tested against Tanzanian district-level data. We assess the extent to which resource allocations within Tanzania depend on the size of the district-level presidential winning coalition and the presidential support coalition. Using indicators that precisely measure coalition size given Tanzania’s electoral rules, we find that smaller winning coalition districts emphasize private goods allocations such as maize vouchers and road construction. Larger coalition districts emphasize public goods provision such as better health care access, residential electrification, greater income equality, and a lower infant mortality rate. These findings hold with controls for poverty, productivity, and population. Support coalition size – that is, total vote share for the winning party – generally has an insignificant effect on public and private goods allocations. Likewise, the control variables generally have little effect . . . 
Alastair Smith, NYU and Bruce Bueno de Mesquita, NYU

Does Ethnic Solidarity Facilitate Electoral Support for Nation-Building Policies?: Evidence from a Political Experiment

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Would voters support or reject a co-ethnic candidate if she were to adopt a platform that appeals equally to all ethnic groups? We address this counterfactual question using experimental data collected in the context of the 2001 elections in Benin. A hierarchical probit model with a structural equation is used to analyze the data. We adopt a Bayesian approach together with Markov Chain Monte Carlo to handle the computations. We ad that ethnic ties strengthen electoral support for national public goods platforms. The effect is stronger among those who are culturally less distant from most other voters . . . 

Do Remittances Promote Democratization?

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This paper presents evidence for international migration to have played a significant role in the Mexican democratization process. It argues that the non-taxability of remittances reduces an incumbent government's ability to maintain political patronage systems and, as a result, elections will become more competitive. The empirical results, using data from municipal elections in Mexico, support this theory. Estimating an instrumental variable probit model, I find that remittances significantly increase the probability of a party in opposition to the former state party PRI to win in a municipal election. Moving from the first to the third quartile of the remittances measure increases that probability in previously state party ruled towns by more than 15% when party preferences are controlled for.
Tobias Pfutze, New York University

Social Cohesion, Institutions, and Growth

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Policy and institutional quality are to a large extent endogenous. While the truth of this statement is familiar to most development scholars, the implications of it have drawn relatively little empirical attention. Understanding more about this relationship matters, because ‘‘poor institutional quality’’ and ‘‘failure to implement better policies’’ are so frequently identified as the causes of growth collapses, endemic poverty, and civil conflict.
William Easterly, Jo Ritzen, and Michael Woolcock

Politically Generated Uncertainty and Currency Crises: Theory, Tests, and Forecasts

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While it is widely acknowledged that political factors contribute to currency crises there have been few efforts at using political variables to improve crisis forecasts. We discuss ways in which political factors can be incorporated into theoretical models of crises, and develop testable hypotheses relating variations in political variables to variations in the probability of a currency crisis. We show that the incorporation of political variables into diverse crisis models substantially improves their out-of-sample predictive performance . . . 
By David Leblang, University of Colorado; Shanker Satyanath, New York University