Time horizon of government and public goods investment: Evidence from Japan

Abstract

Whether the longer tenure of political agents leads to better public policies is a central question in political economy. Tenure security extends the time horizons of dictators, which may explain economic growth under extractive institutions. This study estimates the causal impact of longer time horizons of local dictators using sub-national data from 17th-century Japan. Local lords at that time faced the risk of transferring their domains by order of the central government. In 1651, the death of the executive leader of the central government caused a policy reform, and it disproportionally reduced the transfer risk faced by particular local lords (insiders) for plausibly exogenous reasons. By digitizing the historical dataset and using the difference-in-differences method, I find relatively greater agricultural investment in insiders' domains after 1651. Supplemental analyses indicate that this effect is driven by the longer time horizon channel rather than the career concern or local experience channel.