Publication Type: Conference Paper/Unpublished Manuscript
Abstract: This research revisits the political patronage and clientelist networks in the development of Chinese private enterprises. New game rules represented by principled clientelism has been developed between local officials and some entrepreneurs.

Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: Using the BEEPS survey of about 4000 firms in transition economies developed by the World Bank and the EBRD, this paper tests hypotheses concerning the causes of the political behavior of firms in transition economies. The evidence supports the hypothesis that clientelist relations between firms and the state, which have been shown to have detrimental effects on economic growth and income equality elsewhere in the world, exist in many transition economies. The corruption and crony capitalism' observed in many transition countries is generated by firms and state officials who find themselves involved in an interdependent political and economic relationship. High-level corruption in transition economies is generated by personalistic, hierarchical, asymmetrical, clientelist links between firms and government officials rather than the lobbying activity of pressure groups acting on a weak state. In particular, firms tend to engage in corruption in countries with high levels of corruption in order to escape pressure from creditors, because of the scarcity of financial information from their customers, and because of the need for special connections with bank officials to obtain financing. Different factors affect the political behavior of firms in countries with low levels of corruption. The evidence suggests that the extent of political clientelism has a major impact on corruption and economic policy, regardless of the extent of private ownership in the economy. This analysis of the political behavior of firms and the economic policy environment has important policy implications for all countries implementing market-oriented economic reform and attempting to reduce corruption.

Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: There is no consensus – but many competing theories – about the conditions under which political competition supports economic development in some countries but not in others. Theories range from the lack of political “institutionalization” (Huntington) to the lack of elite interest in the economic development of non-elites (Acemoglu and Robinson, broadly speaking). Keefer (2002) argues instead that political incentives to promote development depend on the ability of political competitors to make credible pre-electoral promises to voters. When promises are only credible to voters with whom competitors have personal relationships, patron-client relationships in society are replicated in politics, with notable consequences for policy making. In this paper, significant and previously unnoticed variation in the policy performance of young and old democracies is documented. Young democracies are more corrupt and exhibit less rule of law, which is known, but they also exhibit more public investment and lower school enrollment. Among the alternative explanations for the poor performance of democracies, ranging from voter information and polarization to the institutions of elections and political decision making, pre-electoral credibility and its effects on politician behavior seem to provide the best explanation of these patterns.

Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: In recent years, decentralization and regional autonomy measures have figured prominently in negotiations designed to end some of the world’s most important conflicts, including in Afghanistan, Iraq and Sudan. While reforms that shift powers to subnational units deserve the attention of those who are trying to promote security via institutional design, the risks associated with these territorial reforms are considerable. When political and economic resources are transferred to subnational governments in the attempt to create meaningful access to the political system for former combatants, the great risk is that these same resources can be used to finance a continuation of the armed struggle instead. In response to the popularity of territorial reforms in many post-conflict settings, this paper sounds a cautionary note by evaluating the negative impact of decentralization on security in Colombia, site of Latin America’s longest and deadliest civil war. After analyzing the design decisions of reformers who hoped that decentralization would help end the civil war, I argue that decentralization in fact financed the expansion of armed clientelism by illegal groups on both the left and right. Thanks to the weakness of the police in much of the national territory, guerrillas and paramilitaries have been able to use decentralized resources to destabilize the state, limiting even further its monopoly over the use of force and creating what are in effect parallel states on the left and right.

Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: We demonstrate that sharply different policy choices across democracies can be explained as a consequence of differences in the ability of political competitors to make credible pre-electoral commitments to voters. Politicians can overcome their credibility deficit in two ways. First, they can build reputations. This requires that they fulfill preconditions that in practice are costly: informing voters of their promises; tracking those promises; ensuring that voters turn out on election day. Alternatively, they can rely on intermediaries -- patrons -- who are already able to make credible commitments to their clients. Endogenizing credibility in this way, we find that targeted transfers and corruption are higher and public good provision lower than in democracies in which political competitors can make credible pre-electoral promises. We also argue that in the absence of political credibility, political reliance on patrons may enhance welfare in the short-run, in contrast to the traditional view that clientelism in politics is a source of significant policy distortion. However, in the long run reliance on patrons may undermine the emergence of credible political parties. The model helps to explain several puzzles. For example, public investment and corruption are higher in young democracies than old; and democratizing reforms succeeded remarkably in Victorian England, in contrast to the more difficult experiences of many democratizing countries, such as the Dominican Republic.

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