The Political Value of Land: Political Reform and Land Prices in Chile

Abstract

In this article, we argue that when patron‐client relations are grounded in economic relationships, such as between landlord and worker, we should expect clientelism to influence not just how public policy, the state, and the political system work, but also how the economy works. We develop a simple model of the economic consequences of electoral clientelism when voting behavior can be observed. Landlords/patrons provide economic rents to workers, and in exchange workers vote for parties favored by landlords. As votes are used by the landlords to accumulate political rents, vote control increases the demand for labor and for land. The model implies that the introduction of the Australian ballot, which destroys this form of clientelism, should lead to a fall in the price of land in those areas where patron‐client relationships are strongest. We test the predictions of the model by examining in detail the evolution of land prices in Chile around May 31, 1958, for which we collected original data. A characteristic of rural Chile at this time were patron‐client relations based on the inquilinaje system, by which a worker, the inquilino, entered into a long‐term, often hereditary, employment relationship with a landlord and lived on his landlord’s estate. We show that the introduction of the Australian ballot in 1958 led to a fall of about 26% in land prices in the areas where these patron‐client relationships were predominant.