Can Europe Run Greece? Lessons from U.S. Fiscal Receiverships in Latin America, 1904-31

Abstract

In 2012 and again in 2015, the German government proposed sending German administrators to manage Greece’s tax and privatization authorities. The idea was that shared governance would reduce corruption and root out inefficient practices. (In 2017 the Boston Globe proposed a similar arrangement for Haiti.) We test a version of shared governance using eight U.S. interventions between 1904 and 1931, under which American officials took over management of Latin American fiscal institutions. We develop a stylized model in which better monitoring by incorruptible managers does not lead to higher government revenues. Using a new panel of data on fiscal revenues and the volume and terms of trade, we find that revenue fell under receiverships. Our results hold under instrumental variables estimation and with counterfactual specifications using synthetic controls.