Elites and Institutional Persistence

Particular sets of institutions, once they become established in a society, have a strong tendency to persist. In this paper I argue that understanding how elites form and reproduce is key to understanding the persistence of institutions over time. I illustrate this idea with a simple political economy theory of institutions and through examples from Liberia, the US, South Africa and Germany I show how elites influence institutions. To change institutions requires having an understanding of how reforms influence the preferences, capabilities and strategies of elites.elites, political economy, persistence of institutions

Political Conflict and Power-sharing in the Origins of Modern Colombia

In this paper we present historical evidence and a theoretical analysis of the origins of political stability and instability in Colombia for the period 1850-1950, and their relationship to political, particularly electoral, institutions. We show that the driving force behind institutional change over this period, specifically the move to proportional representation (PR), was the desire of the Conservative and Liberal parties to come up with a way of credibly dividing power to avoid civil war and conflict, a force intensified by the brutal conflict of the War of a Thousand days between 1899 and 1902. The problem with majoritarian electoral institutions was that they did not allocate power in a way which matched the support of the parties in the population, thus encouraging conflict. The strategic advantage of PR was that it avoided such under-representation. The parties however could not initially move to PR because it was not `fraud proof' so instead, in 1905, adopted the "incomplete vote" which simply allocated 2/3 of the legislative seats to the winning party and 1/3 to the loser. This formula brought peace. The switch to PR arose when the Liberals became confident that they could solve problems of fraud. But it only happened because they were able to exploit a division within the Conservatives. The switch also possibly reflected a concern with the rising support for socialism and the desire to divide power more broadly. Our findings shed new light on the origins of electoral systems and the nature of political conflict and its resolution.

Economic Backwardness in Political Perspective

We construct a simple model where political elites may block technological and institutional development, because of a 'political replacement effect'. Innovations often erode elites' incumbency advantage, increasing the likelihood that they will be replaced. Fearing replacement, political elites are unwilling to initiate change, and may even block economic development. We show that elites are unlikely to block development when there is a high degree of political competition, or when they are highly entrenched. It is only when political competition is limited and also their power is threatened that elites will block development. We also show that such blocking is more likely to arise when political stakes are higher, and that external threats may reduce the incentives to block. We argue that this model provides an interpretation for why Britain, Germany and the U.S. industrialized during the nineteenth century, while the landed aristocracy in Russia and Austria-Hungary blocked development.

Land Reform and the Political Organization of Agriculture

The modern theory of agrarian organization has studied how the economic environment determines organizational form under the assumption of stable property rights to land. The political economy literature has modelled the endogenous determination of property rights. In this paper we propose a model in which the economic organization of agriculture and the political equilibrium determining the distribution of property rights are jointly determined. In particular, because the form of organization may affect the probability and distribution of beneÞts from agrarian reform, it may be determined in anticipation of this impact. The model offers a reason for why tenancy, despite its economic advantages has been so little used in countries where agrarian reform is a salient political issue. We argue that this in particular helps to understand the dearth of tenancy and the relative failure of land reform in Latin America.Agrarian Organization, Political Economy, Land Reform

Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution

Among countries colonized by European powers during the past 500 years those that were relatively rich in 1500 are now relatively poor. We document this reversal using data on urbanization patterns and population density, which, we argue, proxy for economic prosperity. This reversal is inconsistent with a view that links economic development to geographic factors. According to the geography view, societies that were relatively rich in 1500 should also be relatively rich today. In contrast, the reversal is consistent with the role of institutions in economic development. The expansion of European overseas empires starting in the 15th century led to a major change in the institutions of the societies they colonized. In fact, the European intervention appears to have created an 'institutional reversal' among these societies, in the sense that Europeans were more likely to introduce institutions encouraging investment in regions that were previously poor. This institutional reversal accounts for the reversal in relative incomes. We provide further support for this view by documenting that the reversal in relative incomes took place during the 19th century, and resulted from societies with good institutions taking advantage of industrialization opportunities.

When is Democracy an Equilibrium?: Theory and Evidence from Colombia's "La Violencia"

The conventional wisdom in political science is that for a democracy to be consolidated, all groups must have a chance to attain power. If they do not then they will subvert democracy and choose to fight for power. In this paper we show that this wisdom is seriously incomplete because it considers absolute, not relative payoffs. Although the probability of winning an election increases with the size of a group, so does the probability of winning a fight. Thus in a situation where all groups have a high chance of winning an election, they may also have a high chance of winning a fight. Indeed, in a natural model, we show that democracy may never be consolidated in such a situation. Rather, democracy may only be stable when one group is dominant. We provide a test of a key aspect of our model using data from "La Violencia", a political conflict in Colombia during the years 1946-1950 between the Liberal and Conservative parties. Consistent with our results, and contrary to the conventional wisdom, we show that fighting between the parties was more intense in municipalities where the support of the parties was more evenly balanced.

Reevaluating the Modernization Hypothesis

This paper revisits and critically reevaluates the widely-accepted modernization hypothesis which claims that per capita income causes the creation and the consolidation of democracy. We argue that existing studies find support for this hypothesis because they fail to control for the presence of omitted variables. There are many underlying historical factors that affect both the level of income per capita and the likelihood of democracy in a country, and failing to control for these factors may introduce a spurious relationship between income and democracy. We show that controlling for these historical factors by including fixed country effects removes the correlation between income and democracy, as well as the correlation between income and the likelihood of transitions to and from democratic regimes. We argue that this evidence is consistent with another well-established approach in political science, which emphasizes how events during critical historical junctures can lead to divergent political-economic development paths, some leading to prosperity and democracy, others to relative poverty and non-democracy. We present evidence in favor of this interpretation by documenting that the fixed effects we estimate in the post-war sample are strongly associated with historical variables that have previously been used to explain diverging development paths within the former colonial world.