Essays in political economy

Abstract

The first essay uncovers a causal link running from democratic institutions to development. Time-varying instruments for democracy are used, allowing a causal interpretation of the results that is not contaminated by feedback effects running from income to democracy. The main instrument used for domestic democracy is the lagged average level of democracy in cultural neighbors, which is motivated by theories of democratic diffusion in political science. To bypass the issue of spatial correlation attendant to the use of geographic distance-weighted democracy, the instrument is weighted by linguistic distance. The rationale is that the speed at which political ideas and movements spread between two countries is inversely related to the linguistic distance between those two countries. In addition, human capital is also instrumented using data on minimum working age and minimum years of schooling. The second essay contributes to the literature on political leaders and economic outcomes by showing that leaders affect technical change. Innovation is a cornerstone of economic growth; the study is the first to investigate the effects of political leaders on innovation. I use the deaths of political leaders while in power as quasi-experiments where the timing of political transitions is unrelated to any socioeconomic trends, unlike other political transitions (through, say, elections or coups). I find strong empirical evidence that political leaders affect innovation. Using bootstrap sampling, I also show that foreign-educated leaders have positive effects on technical change. The third essay studies the links between pre-modern belief systems and contemporary armed conflicts, which provides an empirical test of the theoretical proposition that where credible commitments to peace are more difficult, more violence erupts. I use ethnographic data on the belief systems of African societies prior to European colonization along with geo-referenced data on armed conflicts from 1997 to 2013. The results show that both the incidence and intensity of conflict are negatively correlated with belief rigidity. More rigid belief systems are systematically associated with worsened violence. The proposed economic mechanism is that of an increase in inter-group coordination costs. Holding all else constant, economic theory suggests that societies whose belief systems are the most intransigent find compromise more costly, which raises the incidence and intensity of armed conflict. This result is robust to controlling for rich sets of economic, geographic, and cultural variables that can affect conflict through their effects on belief systems.