Job Market Paper

Like Father, Like Son? The Effect of Political Dynasties on Economic Development
 
Abstract
This paper studies how dynastic politics affects economic development in India, using variation from three distinct natural experiments. Dynastic politics has theoretically ambiguous effects: bequest motives may lengthen politicians' time horizons (founder effects), but heritable political capital may make elections less effective at holding dynastic heirs accountable (descendant effects). We compile detailed biographical data on all Indian legislators since 1862, and present three empirical findings. First, we identify descendant effects using a close elections regression discontinuity design, and find that descendants worsen poverty and public good provision in villages they represent. Descendants underperform partly due to moral hazard: they inherit voters loyal to their family, which dampens their performance incentives. Second, we estimate founder effects by examining constituency boundary changes. Founders have positive effects on economic development, and this is partly driven by bequest motives: politicians with a son are twice as likely to establish a dynasty and exert more effort while in office. Third, we identify the overall effects of a dynastic political environment using an instrumental variables strategy based on the gender composition of past incumbents' children. Dynastic politics generates a “reversal of fortune” development pattern, where places develop faster in the short run (because of founder effects), but are poorer in the long run (because descendant effects outweigh founder effects). A simple overlapping generations model with heritable human and political capital explains these empirical facts. 
 
sid_dynasties_draft_14jan2019.pdf4.52 MB