One Mandarin Benefits the Whole Clan: Hometown Infrastructure and Nepotism in an Autocracy

This paper studies nepotism by government officials in an authoritarian regime. We collect a unique dataset of political promotions of officials in Vietnam and estimate their impact on public infrastructure in their hometowns. We find strong positive effects on several outcomes, some with lags, including roads to villages, marketplaces, clean water access, preschools, irrigation, and local radio broadcasters, as well as the hometown’s propensity to benefit from the State’s “poor commune support program”. Nepotism is not limited to only top-level officials, pervasive even among those without direct authority over hometown budgets, stronger when the hometown chairperson’s and promoted official’s ages are closer, and where provincial leadership has more discretionary power in shaping policies, suggesting that nepotism works through informal channels based on specific political power and environment. Contrary to pork barrel politics in democratic parliaments, members of the Vietnamese legislative body have little influence on infrastructure investments for their hometowns. Given the top-down nature of political promotions, officials arguably do not help their tiny communes in exchange for political support. Consistent with that, officials favor only their home commune and ignore their home district, which could offer larger political support. These findings suggest that nepotism is motivated by officials’ social preferences directed towards their related circles, and signals an additional form of corruption that may prevail in developing countries with low transparency.nepotism, infrastructure construction, official’s hometown, political connection,political promotion, social preference, directed altruism

Essays on firms, innovation, and culture

This thesis examines innovation and culture within the firm. The first chapter provides evidence on the effect of trust on innovation within firms. I build a new matched CEOfirm-patent dataset, and exploit variations in (i) generalized trust across the countries of CEOs’ ancestry, inferred from their last names, and (ii) CEOs’ bilateral trust towards inventors’ countries ancestry or R&D labs, both yielding an effect of around 6% more future patents for a standard deviation increase in trust, controlling for stringent fixed effects. Trust-induced innovation is driven by higher-quality patents, consistent with a model in which CEO’s trust incentivizes researchers to undertake high-risk explorative R&D. Finally, CEO’s generalized trust is strongly correlated with broader corporate culture of trust, measured from online employee reviews. The evidence provides a micro-foundation for the well-known macro relationship between trust and growth. The second chapter presents evidence of causal impacts of R&D tax incentives on innovation and technological spillovers using administrative data. Our Regression Discontinuity Design exploits a change in the size threshold that determines eligibility for R&D tax subsidies, and uncovers their large effects on R&D and patenting up to 7 years after the change. R&D tax price elasticities are large (lower bound of 1.1), as treated firms are smaller, and more likely financially constrained. Neighboring firms in small technology class with treated firms enjoy positive spillovers. The third chapter shows strong positive spillovers of privatization on firms’ total factor productivity through backward linkages in Vietnam. 10% more market share of privatized firms in downstream industries is associated with 4 percentage points increase in TFP. The effect is driven by privatization in local markets, is stronger (weaker) in upstream industries facing more import (export), and in provinces with higher entry costs. It likely works through elevated pressure from privatized client firms

Tax relief for Research and Development is a rare example of an innovation policy that actually works

UK business R&D would be 10 percent lower in the absence of tax breaks, write Kieu-Trang Nguyen and John Van Reene

Out of Sight, Out of Mind:The Value of Political Connections in Social Networks

This paper investigates the impact of social-network connections to politicians on firm value. We focus on the networks of university classmates and alumni among directors of U.S. public firms and congressmen. Using the Regression Discontinuity Design based on close elections from 2000 to 2008, we identify that a director’s connection to an elected congressman causes a Weighted Average Treatment Effect on Cumulative Abnormal Returns of -2.65% surrounding the election date. The effect is robust and consistent through various specifications, parametric and nonparametric, with different outcome measures and social network definitions, and across many subsamples. We find evidence to support the hypothesis that firms benefit more when connected politicians remain in state politics than when they move to federal office. Overall, our study identifies the value of political connections through social networks and uncovers its variation across different states and between state and federal political environments.Social network; political connection; close election; regression discontinuity design; firm value.

One Mandarin Benefits the Whole Clan: Hometown Favoritism in an Authoritarian Regime

We study patronage politics in authoritarian Vietnam, using an exhaustive panel of ranking officials from 2000 to 2010 to estimate their promotions’ impact on infrastructure in their patrilineal hometowns. Favoritism is pervasive across all ranks, even among officials without budget authority. Promotions of officials strongly improve hometown infrastructure including roads, marketplaces, and irrigation. In contrast to democracies’ pork-barrel politics, elected legislators are not influential. Favoritism is likely motivated by officials’ social preferences for hometowns rather than by political considerations, because favors are narrowly targeted to small communes, and are stronger where local culture emphasizes the family bond

One Mandarin Benefits the Whole Clan: Hometown Favoritism in an Authoritarian Regime

We study patronage politics in authoritarian Vietnam, using an exhaustive panel of ranking officials from 2000 to 2010 to estimate their promotions' impact on infrastructure in their hometowns of patrilineal ancestry. Native officials' promotions lead to a broad range of hometown infrastructure improvement. Hometown favoritism is pervasive across all ranks, even among officials without budget authority, except among elected legislators. Favors are narrowly targeted toward small communes that have no political power, and are strengthened with bad local governance and strong local family values. The evidence suggests a likely motive of social preferences for hometown

One Mandarin benefits the whole clan: hometown favoritism in an authoritarian regime

We study patronage politics in authoritarian Vietnam, using an exhaustive panel of ranking officials from 2000 to 2010 to estimate their promotions’ impact on infrastructure in their hometowns of patrilineal ancestry. Native officials’ promotions lead to a broad range of hometown infrastructure improvement. Hometown favoritism is pervasive across all ranks, even among officials without budget authority, except among elected legislators. Favors are narrowly targeted toward small communes that have no political power, and are strengthened with bad local governance and strong local family values. The evidence suggests a likely motive of social preferences for hometown

Do tax incentives for research increase firm innovation? An RD design for R&D

We present the first evidence showing causal impact of research and development (R&D) tax incentives on innovation outcomes. We exploit a change in the asset-based size thresholds for eligibility for R&D tax subsidies and implement a Regression Discontinuity Design using administrative tax data on the population of UK firms. There are statistically and economically significant effects of the tax change on both R&D and patenting, with no evidence of a decline in the quality of innovation. R&D tax price elasticities are large at about 2.6, probably because the treated group is from a sub-population subject to financial constraints. There does not appear to be pre-policy manipulation of assets around the thresholds that could undermine our design, but firms do adjust assets to take advantage of the subsidy post-policy. We estimate that over 2006-11 business R&D would be around 10% lower in the absence of the tax relief scheme

One mandarin benefits the whole clan: hometown favoritism in an authoritarian regime

We study patronage politics in authoritarian Vietnam, using an exhaustive panel of 603 ranking officials from 2000 to 2010 to estimate their promotions’ impact on infrastructure in their hometowns of patrilineal ancestry. Native officials’ promotions lead to a broad range of hometown infrastructure improvement. Hometown favoritism is pervasive across all ranks, even among officials without budget authority, except among elected legislators. Favors are narrowly targeted towards small communes that have no political power, and are strengthened with bad local governance and strong local family values. The evidence suggests a likely motive of social preferences for hometown