Durham University Business School
Mill Hill Lane, Room 176
DH1 3LB, Durham
Institutional Affiliation: Durham University
NBER Working Papers and Publications
|April 2019||The Democracy Effect: a Weights-Based Identification Strategy|
with Pedro Dal Bó, Andrew Foster: w25724
Dal Bó, Foster and Putterman (2010) show experimentally that the effect of a policy may be greater when it is democratically selected than when it is exogenously imposed. In this paper we propose a new and simpler identification strategy to measure this democracy effect. We derive the distribution of the statistic of the democracy effect, and apply the new strategy to the data from Dal Bó, Foster and Putterman (2010) and data from a new real-effort experiment in which subjects’ payoffs do not depend on the effort of others. The new identification strategy is based on calculating the average behavior under democracy by weighting the behavior of each type of voter by its prevalence in the whole population (and not conditional on the vote outcome). We show that use of these weights eliminates...