Political Economy

April 10, 2015
Alberto Alesina of Harvard University, Organizer

Sergei Guriev, Sciences Po, and Daniel Treisman, University of California, Los Angeles and NBER

How Modern Dictators Survive: Cooptation, Censorship, Propaganda, and Repression

Guriev and Treisman develop an informational theory of dictatorship. Dictators survive not because of their use of force or ideology but because they convince the public—rightly or wrongly—that they are competent. Citizens do not observe the dictator's type but infer it from signals inherent in their living standards, state propaganda, and messages sent by an informed elite via independent media. If citizens conclude the dictator is incompetent, they overthrow him in a revolution. The dictator can invest in making convincing state propaganda, censoring independent media, co-opting the elite, or equipping police to repress attempted uprisings—but he must finance such spending with taxes that depress the public's living standards. The researchers show that incompetent dictators can survive as long as economic shocks are not too large. Moreover, their reputations for competence may grow over time. Censorship and co-optation of the elite are substitutes, but both are complements of propaganda. Repression of protests is a substitute for all the other techniques. In some equilibria the ruler uses propaganda and co-opts the elite; in others, propaganda is combined with censorship. The multiplicity of equilibria emerges due to coordination failure among members of the elite. The authors show that repression is used against ordinary citizens only as a last resort when the opportunities to survive through co-optation, censorship, and propaganda are exhausted. In the equilibrium with censorship, difficult economic times prompt higher relative spending on censorship and propaganda. The results illuminate tradeoffs faced by various recent dictatorships.

Andrea Prat, Columbia University

Media Power

In this paper, Prat defines the power of a media organization as its ability to induce voters to make electoral decisions they would not make if reporting were unbiased. It proposes a measure of power with two features. First, while existing concentration indices are not micro-founded because they are built by aggregating market shares across platforms, the new measure performs cross-platform aggregation at the voter level on the basis of their attention patterns. Second, rather than relying on a particular model of media influence, the paper derives a robust upper bound to media power over a range of assumptions on the beliefs and attention patterns of voters. Computing the value of the index for all major news sources in the United States from 2000 to 2012 results in four findings. First, it cannot be excluded that the three largest media conglomerates could individually swing the outcome of most presidential elections. Second, in all specifications the most powerful media organizations are broadcasters: the press and new media are always below. Third, relative media power is well approximated by a simple function of attention shares. Fourth, a calibration exercise shows how empirical estimates of media influence can be used to refine the power index.

Brian G. Knight, Brown University and NBER

An Econometric Evaluation of Competing Explanations for the Midterm Gap (NBER Working Paper No. 20311)

This paper provides a unified theoretical and empirical analysis of three longstanding explanations for the consistent loss of support for the President's party in midterm Congressional elections: (1) a Presidential penalty, defined as a preference for supporting the opposition during midterm years, (2) a surge and decline in voter turnout, and (3) a reversion to the mean in voter ideology. To quantify the contribution of each of these factors, Knight builds an econometric model in which voters jointly choose whether or not to participate and which party to support in both House and Presidential elections. Estimated using ANES data from both Presidential and midterm years, the model can fully explain the observed midterm gaps, and counterfactual simulations demonstrate that each factor makes a sizable contribution towards the midterm gap, with the Presidential penalty playing the largest role.

Thomas Dohmen, Maastricht University; Benjamin Enke, Bonn Graduate School of Economics; Armin Falk, University of Bonn; David Huffman, Swarthmore College; and Uwe Sunde, University of St.Gallen

Patience and The Wealth of Nations

According to standard dynamic choice theories, patience is a key driving factor behind the accumulation of the proximate determinants of economic development. Using a novel representative data set on time preferences from 80,000 individuals in 76 countries, Dohmen, Enke, Falk, Huffman, and Sunde investigate the empirical relevance of this hypothesis in the context of a development accounting framework. The researchers find a significant reduced-form relationship between patience and development, whether measured in terms of contemporary income, historical development, or medium- and long-run growth rates, with patience explaining a substantial fraction of development differences across countries. Consistent with the idea that patience affects national income through accumulation processes, patience also strongly correlates with human and physical capital accumulation, investments into productivity, and institutional quality. Additional results show that the relationship between patience, human capital, and income extends to analyses across regions within countries, and across individuals within regions. Taken together, the authors' results point to the importance of heterogeneity in time preferences for understanding comparative development.

Leonardo Bursztyn, University of California, Los Angeles and NBER; Michael J. Callen, University of California, Los Angeles; Bruno Ferman, Sao Paulo School of Economics, FGV; Syed Ali Hasanain, Lahore University of Management Sciences; and Noam Yuchtman, University of California, Berkeley and NBER

Identifying Ideology: Experimental Evidence on Anti-Americanism in Pakistan

Identifying the role of intrinsic, ideological motivation in political behavior is confounded by agents' consequential aims and social concerns. Bursztyn, Callen, Ferman, Hasanain, and Yuchtman present an experimental methodology isolating Pakistani men's intrinsic motives for expressing anti-American ideology in a context with clearly-specified financial costs, but negligible other consequential or social considerations. Following a survey, the researchers offer the subjects a bonus payment. One-quarter of subjects forgo around one-fifth of a day's wage to avoid anonymously checking a box indicating gratitude toward the U.S. government, revealing anti-Americanism. The authors find that even extremists moderate their political expression when the financial cost is high and when anticipating public expression.

Daron Acemoglu, MIT and NBER; Georgy Egorov, Northwestern University and NBER; and Konstantin Sonin, Higher School of Economics

Social Mobility and Stability of Democracy: Re-evaluating de Tocqueville

An influential thesis going back to de Tocqueville views social mobility as an important bulwark of democracy: when members of a social group expect to transition to some other social group in the near future, they should have less reason to exclude these other social groups from the political process. In this paper, Acemoglu, Egorov, and Sonin investigate this hypothesis using a dynamic model of political economy in the presence of social mobility. As well as formalizing this argument, their model demonstrates its limits, elucidating a robust theoretical force making democracy less stable in societies with high social mobility: when the median voter expects to move up (respectively down), she would prefer to give less voice to poorer (respectively richer) social groups. The researchers' theoretical analysis also shows that in the presence of social mobility, the political preferences of an individual depend on the potentially conflicting preferences of her "future selves," under certain conditions paving the way to multiple equilibria.

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