Understanding the economic impacts of political dynasties: evidence from India

Abstract:

Political dynasties are present in most countries, yet we have very limited empirical evidence on the economic consequences of dynastic rule. Economic theory makes ambiguous predictions about political dynasties: on the one hand, dynasts may behave like “stationary bandits” and invest more in their constituencies, and use their clout to direct state resources to their localities. On the other hand, dynasts may have particularly strong incentives to foster long-term clientelistic relationships, which may chill political competition and worsen governance. We compile novel data on the family connections of Indian politicians, and use a close elections RD design to estimate the impact of being ruled by a political dynasty on local economic development. Using night-time luminosity as a measure of local economic activity, we find that constituencies where dynasts narrowly win grow 6.5pp slower per year (~0.2 std dev) compared to constituencies where dynasts narrowly lose. These results hold even when comparing neighbouring villages that are in the same administrative district but different political constituencies. Dynastic rule also worsens public good provision (~0.14 std dev). Voters subjectively assess dynastic politicians to perform worse (~0.4 std dev), but this effect is only observed among non-coethnic voters, consistent with dynasts fostering ethnic patronage. The negative impacts of dynastic rule do not appear to be driven by: (i) greater rent-seeking among dynasts; (ii) lower effort exerted by dynastic politicians; and (iii) dynastic victories reducing political competition in subsequent periods. Our results suggest that it is important for theories of political dynasties to explain why they are prevalent as well as bad for development.
Last updated on 12/07/2017