Democracy, Media and Corruption

1
Democracy, Media and Corruption

• Democracy ? corruption?
• Olson 1993
• Clague, Keefer, Knack, and Olson 1996
• Keefer 2007
• Free press ? corruption?
• Adsera, Boix, and Payne 2003

2
Olson 1993

• Modern classic in theoretical politics
• Echoes of The Logic of Collective Action 1965
• Individuals free ride
• Developed further in Power and Prosperity 2000
• Anarchy (roving bandit) lt Tyranny (stationary
  bandit) lt Democracy (majority government)

3
Clague, Keefer, Knack, and Olson 1996

• Pioneering and most quoted empirical articles on
  the impact of political institutions
• Controversial points
• Structure
• Simple but powerful Olsons theory
• World Bank economists empirical methods

4
Keefer 2007

• Most recent contributions to the debate
• Encompassing empirical analysis of differences
  within democracies
• Several dimensions of Quality of Government
• Corruption
• Provision of Private Goods
• Provision of Public Goods

5
Adsera, Boix, and Payne 2003

• Important contribution to the debate on Causes of
  Good Government
• Theory with mechanisms linking Democracy, Free
  Press and Corruption
• Original empirical analysis cross-country and
  within-country variation

6
Olson 1993

• Are all polities built by means of force and
  coercion?
• no one has ever found a large society that
  obtained a peaceful order or other public goods
  through an agreement among the individuals in the
  society.

7
Stationary bandits gt Roving bandits ?

• Why should warlords, who were stationary bandits
  continuously stealing from a given group of
  victims, be preferred, by those victims, to
  roving bandits who soon departed?

8
monopoly of theft gt uncoordinated competitive
theft

• "the first blessing of the invisible hand the
  rational, self-interested leader of a band of
  roving bandits is led, as though by an invisible
  hand, to settle down, wear a crown, and replace
  anarchy with government. The gigantic increase in
  output that normally arises from the provision of
  a peaceful order and other public goods gives the
  stationary bandit a far larger take than he could
  obtain without providing government.

9
Democratic rulers gt Dictators

• Not because democrat incumbents are more
  benevolent
• Assumption taxes ? distort incentives ? reduces
  income so much that tax collections fall
• Dictators establish a revenue-maximizing tax
• Democrat rulers tax less the majority always has
  a higher stake at the growth of the national
  economy
• Underlying idea the broadest the interests
  represented in government (majority gt oligarchy gt
  dictator), the more the government will take into
  account the social costs of redistributions

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But, if you are unlucky, and have a dictator

• Dynastic Monarchies gt Standard Dictators
• Why?
• Any other critical comment to Olsons theory?

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Why do democracies emerge?

• If autocrat rulers obtain more revenue than
  democratic ones
• why do not those rebel leaders who overthrow a
  ruler always establish another autocracy instead
  of a democracy?

12
Great works, great last sentences

• The moral appeal of democracy is now almost
  universally appreciated, but its economic
  advantages are scarcely understood.

13
Clague, Keefer, Knack, and Olson1996

• Simple but powerful Olsons theory World Bank
  economists empirical quantitative methods
• What matters for protection of PPRR is not
  Democracy vs. Dictatorship, but Short vs. Long
  Time Horizons
• But, at the same time, WHY and HOW property
  rights are protected in democracy dictatorship

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Different reasons for protection of PPRR

• If Dictators do not expropriate (too much) and
  protect ? rise in national income ? more taxes
• If the democracy is to last, incumbents need to
  delegate the protection of PPRR to disinterested
  parties (e.g. independent courts)

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Theoretical Hypotheses

• In dictatorships time horizon of the
  individual dictator ? protection of contract
  and PPRR
• In democracies duration of the democratic
  system ? protection of contract and PPRR
• So, time heals all wounds.

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Empirical analysis

• Proxies for the expected remaining life (of the
  system/of the dictator)
• for democracies current age of the democratic
  system
• for dictatorships years of the dictator in power
  (?)
• Whats wrong in tables 3-5?

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Results

• 1) confirm the hypotheses the longer
  (dictator/democratic system) ? protection of
  contract and PPRR
• 2) point out an intriguing U- or J-shaped
  relationship between democratization and
  protection of contract and PPRR

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The mysterious case of the U- or J-shaped
relationship

• Increasingly, empirical studies tend to show
  that
• Consolidated/Old Democracies gt Dictatorships gt
  Transitional/Young Democracies (Keefer 2007)
  
• (focus on time)
• Full/Totally Free Democracies gt Dictatorships gt
  Semi-/Partially Free Democracies lt
• (focus on degree of democracy)

19
Keefer 2007

• Tackles the most intriguing puzzle in theory,
  Democracy gt Dictatorship, but, in practice, many
  democracies fall short of many autocracies in
  many indicators of good government (e.g.
  corruption)
• Offers
• 1) theoretical explanation
• 2) empirically someone proves for the first time
  the systematic performance differences between
  Young and Old Democracies

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Theory

• In relation to Old Democracies, the Young ones
• underprovide non-targeted goods (e.g. education,
  PPRR)
• overprovide targeted goods (e.g. patronage)
• and are more corrupt
• Reason Young democracies candidates are not
  credible

21
How to win credibility?

• Two options for new incumbents
• Be Good Invest resources to show they can
  provide public goods (costly)
• Be Bad Rely on local patrons and deliver
  targeted goods to them and their clients
  (cheaper)
• Problems with these options? Or with a theory
  based on something vague such as credibility?

22
Alternative factors?

• Young democracies also have more political
  violence than Old ones
• Reason more freedoms
• Short-time-horizon incumbents in Young D vs.
  Long-term-horizon incumbents in Old D

23
Empirical analysis

• His proxies for good government
• Nontargeted policies benefiting all citizens
  secondary school enrollment, bureaucratic
  quality, the rule of law, and government
  ownership of newspapers
• Targeted policies, benefiting discrete and
  identifiable groups of voters public investment
  (where pork barrel projects reside) and the
  central government wage bill (which finances
  patronage jobs).
• Corruption standard measure of corruption
• Do you agree with the proxies? Do you think the
  analysis supports his predictions?

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Expected effects of control variables
Nontargeted Goods Targeted
Goods Rent Seeking More presidential
Less Less Less More
majoritarian Less More Less Greater social
cleavages Less Less More More affected by
conflict Less Less More Less citizen
information Less Less More
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Problems with this analysis

• Any omitted variables you would introduce?
• Does his variable (age) remain strong after the
  control variables are included?
• Any other flaw?

26
Adsera, Boix, and Payne 2003

• Important contributions to the debate What Causes
  Good Government
• Democracy necessary, but not sufficient
  condition for good government. We also need Free
  Press
• Unlike most of the previous literature, the
  theory here fleshes out the micro-mechanisms
  through which rulers comply or are made to behave
  in a benevolent fashion
• Original test cross-country and within-country
  (US)

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Mechanisms of the theory

• 1.Democracy gt Dictatorships
• Mechanism Electoral accountability
• 2.Better informed citizens gt Poorly informed
  citizens
• Mechanism No room to divert resources when
  people know it!
• 3.Capital mobility gt non-mobile assets (e.g. oil)
• Mechanism People can exit

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Empirical analysis

• Encompassing account of alternative explanatory
  variables (p.451-457)
• Main result as long as they introduce controls,
  Democracy seems to exert less significant
  influence on good government, but Free Press
  remains strong
• Fine, but sure you also found some problems

29
World Bank Governance Indicators I

• "Not everything that can be counted counts, and
  not everything that counts can be counted"
• Albert Einstein
• 212 countries and territories
• Period 19962006
• Six dimensions of governance
• Voice and Accountability
• Political Stability and Absence of Violence
• Government Effectiveness Regulatory Quality
• Rule of Law
• Control of Corruption

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World Bank Governance Indicators II

• Reflect the views of enterprise, citizen and
  expert survey respondents in industrial and
  developing countries
• They are aggregate indicators made with lots of
  individual indicators by survey institutes, think
  tanks, non-governmental organizations, and
  international organizations

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World Bank Governance Indicators

• http//info.worldbank.org/governance/wgi2007/world
  map_start.asp?allcountries1
• Intrinsic problem with these data statistically
  significant differences at opposite ends of the
  distribution of governance
• Very difficult to discriminate among the majority
  of countries with any degree of confidence

32
Analysis of corruption in US States

• Which is the advantage of testing a theory in one
  single country? Is there any added value?
• Nice result more circulation of papers ? less
  corruption
• Other variables that matter electoral turnout (a
  lot), social capital (a little)
• Any omitted variable?