Democracy, Media and Corruption

Democracy corruption? Olson 1993 Clague, Keefer, Knack, and Olson 1996 Keefer 2007

Free press corruption? Adsera, Boix, and Payne 2003

Olson 1993

Modern classic in theoretical politics

Echoes of The Logic of Collective Action 1965 Individuals free ride…

Developed further in Power and Prosperity 2000: Anarchy (“roving bandit”) < Tyranny (“stationary bandit”) <

Democracy (majority government)

Clague, Keefer, Knack, and Olson 1996

Pioneering and most quoted empirical articles on the impact of political institutions

Controversial points…

Structure: Simple but powerful Olson’s theory World Bank economists’ empirical methods

Keefer 2007

• Most recent contributions to the debate

• Encompassing empirical analysis of differences within democracies

• Several dimensions of ”Quality of Government”:– Corruption

– Provision of Private Goods

– Provision of Public Goods

Adsera, Boix, and Payne 2003

• Important contribution to the debate on Causes of Good Government:

– Theory with mechanisms linking Democracy, Free Press and Corruption

– Original empirical analysis: cross-country and within-country variation

Olson 1993

• Are all polities built by means of force and coercion?

• “no one has ever found a large society that obtained a peaceful order or other public goods through an agreement among the individuals in the society.”

Stationary bandits > Roving bandits ?

• “Why should warlords, who were stationary bandits continuously stealing from a given group of victims, be preferred, by those victims, to roving bandits who soon departed?”

monopoly of theft > uncoordinated competitive theft

• "the first blessing of the invisible hand: the rational, self-interested leader of a band of roving bandits is led, as though by an invisible hand, to settle down, wear a crown, and replace anarchy with government. The gigantic increase in output that normally arises from the provision of a peaceful order and other public goods gives the stationary bandit a far larger take than he could obtain without providing government.”

Democratic rulers > Dictators

Not because democrat incumbents are more benevolent

Assumption: taxes distort incentives reduces income so much that tax collections fall Dictators establish a revenue-maximizing tax Democrat rulers tax less: the majority always has a higher

stake at the growth of the national economy

Underlying idea: the broadest the interests represented in government (majority > oligarchy > dictator), the more the government will take into account the social costs of redistributions

But, if you are unlucky, and have a dictator…

Dynastic Monarchies > Standard Dictators

Why?

Any other critical comment to Olson’s theory?

Why do democracies emerge?

If autocrat rulers obtain more revenue than democratic ones…

…why do not those rebel leaders who overthrow a ruler always establish another autocracy instead of a democracy?

Great works, great last sentences… • “The moral appeal of democracy is now almost

universally appreciated, but its economic advantages are scarcely understood.”

Clague, Keefer, Knack, and Olson1996

Simple but powerful Olson’s theory + World Bank economists’ empirical quantitative methods

• What matters for protection of PPRR is not Democracy vs. Dictatorship, but Short vs. Long Time Horizons

• But, at the same time, WHY and HOW property rights are protected in democracy # dictatorship

Different reasons for protection of PPRR

If Dictators do not expropriate (too much) and protect rise in national income more taxes

If the democracy is to last, incumbents need to delegate the protection of PPRR to disinterested parties (e.g. independent courts)

Theoretical Hypotheses

• In dictatorships: + time horizon of the individual dictator + protection of contract and PPRR

• In democracies: + duration of the democratic system + protection of contract and PPRR

• So, time heals all wounds….

Empirical analysis

• Proxies for the expected remaining life (of the system/of the dictator)– for democracies: current age of the democratic system

– for dictatorships: years of the dictator in power (?)

• What’s wrong in tables 3-5?

Results

• 1) confirm the hypotheses: the longer (dictator/democratic system) + protection of contract and PPRR

• 2) point out an intriguing U- or J-shaped relationship between democratization and protection of contract and PPRR

The mysterious case of the U- or J-shaped relationship…

Increasingly, empirical studies tend to show that: Consolidated/Old Democracies > Dictatorships >

Transitional/Young Democracies (Keefer 2007)

(focus on “time”)

Full/Totally Free Democracies > Dictatorships > Semi-/Partially Free Democracies <

(focus on “degree” of democracy)

Keefer 2007

• Tackles the most intriguing puzzle: in theory, Democracy > Dictatorship, but, in practice, many democracies fall short of many autocracies in many indicators of good government (e.g. corruption)

• Offers:– 1) theoretical explanation

– 2) empirically someone proves for the first time the systematic performance differences between Young and Old Democracies

Theory

• In relation to Old Democracies, the Young ones…– underprovide non-targeted goods (e.g.

education, PPRR)– overprovide targeted goods (e.g. patronage)– and are more corrupt

• Reason: Young democracies = candidates are not credible

How to win credibility?

Two options for new incumbents:– Be Good: Invest resources to show they can provide

public goods (costly)– Be Bad: Rely on local “patrons” and deliver targeted

goods to them and their “clients” (cheaper)

Problems with these options? Or with a theory based on something vague such as “credibility”?

Alternative factors?

• Young democracies also have more political violence than Old ones

– Reason: “more freedoms”

• Short-time-horizon incumbents in Young D vs. Long-term-horizon incumbents in Old D

Empirical analysis

His proxies for good government:– Nontargeted policies benefiting all citizens: secondary

school enrollment, bureaucratic quality, the rule of law, and government ownership of newspapers

– Targeted policies, benefiting discrete and identifiable groups of voters: public investment (where pork barrel projects reside) and the central government wage bill (which finances patronage jobs).

– Corruption: standard measure of corruption

Do you agree with the proxies? Do you think the analysis supports his predictions?

Expected effects of control variables

Nontargeted Goods Targeted Goods Rent Seeking More presidential Less Less Less

More majoritarian Less More Less

Greater social cleavages Less Less More

More affected by conflict Less Less More

Less citizen information Less Less More

Problems with this analysis

Any omitted variables you would introduce?

Does his variable (“age”) remain strong after the control variables are included?

Any other flaw?

Adsera, Boix, and Payne 2003

• Important contributions to the debate What Causes Good Government:– Democracy: necessary, but not sufficient condition for good

government. We also need Free Press

– Unlike most of the previous literature, the theory here fleshes out the micro-mechanisms through which rulers comply or are made to behave in a benevolent fashion

– Original test: cross-country and within-country (US)

Mechanisms of the theory

• 1.Democracy > Dictatorships– Mechanism: Electoral accountability

• 2.Better informed citizens > Poorly informed citizens– Mechanism: No room to divert resources when people know

it!

• 3.Capital mobility > non-mobile assets (e.g. oil)– Mechanism: People can “exit”

Empirical analysis Encompassing account of alternative explanatory

variables (p.451-457)

Main result: as long as they introduce controls, Democracy seems to exert less significant influence on good government, but Free Press remains strong

Fine, but sure you also found some problems…

World Bank Governance Indicators I "Not everything that can be counted counts, and not everything that counts can be

counted"

Albert Einstein

• 212 countries and territories • Period: 1996–2006• Six dimensions of governance:

– Voice and Accountability – Political Stability and Absence of Violence – Government Effectiveness Regulatory Quality – Rule of Law – Control of Corruption

World Bank Governance Indicators II

• Reflect the views of enterprise, citizen and expert survey respondents in industrial and developing countries

• They are aggregate indicators made with lots of individual indicators by survey institutes, think tanks, non-governmental organizations, and international organizations

World Bank Governance Indicators

http://info.worldbank.org/governance/wgi2007/worldmap_start.asp?allcountries=1

Intrinsic problem with these data: statistically significant differences at opposite ends of the distribution of governance Very difficult to discriminate among the majority

of countries with any degree of confidence

Analysis of corruption in US States

• Which is the advantage of testing a theory in one single country? Is there any added value?

• Nice result : more circulation of papers less corruption

• Other variables that matter: electoral turnout (a lot), social capital (a little)

• Any omitted variable?