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  5. Distance, State Capacity, and Development
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Distance, State Capacity, and Development

Paper Session

Sunday, Jan. 8, 2023 8:00 AM - 10:00 AM (CST)

New Orleans Marriott, Preservation Hall Studio 2
Hosted By: Association for Comparative Economic Studies
  • Chair: Quoc-Anh Do, Northwestern University

State Capacity and Unequal Public Good Provision: Evidence from District Splitting in India and Indonesia

Filipe Campante
,
Johns Hopkins University
Samuel Bazzi
,
University of California-San Diego
Quoc-Anh Do
,
Monash University
Radhika Goyal
,
University of California-San Diego
Matthew Gudgeon
,
U.S. Military Academy
Karthik Muralidharan
,
University of California-San Diego

Abstract

We study the determinants of spatial inequality in public good provision and its relationship with state capacity. We provide evidence that increased distance to the center of political and administrative power causes worse public good provision, using two separate district splitting experiments, from India and Indonesia. Specifically, we show that villages that end up closer to the district capital after the split get more public goods across a wide variety of types, which translate into long-run differences in economic outcomes, particularly for disadvantaged communities. We then show that this pattern is consistent with a model where the spatial distribution of state capacity in public good provision is endogenously chosen in response to political incentives. This framework yields additional predictions on the dynamic response of different types of public goods to the splitting shock, which are also borne out by the data. Our results underscore that the political choice of where to invest in state capacity can have important economic and welfare implications.

The Political Geography of Cities

Paul Schaudt
,
University of St. Gallen
Richard Bluhm
,
Leibniz University
Christian Lessman
,
Technische University Dresden

Abstract

We study the link between subnational capital cities and urban development using a global data set of hundreds of first-order administrative and capital city reforms from 1987 until 2018. We show that gaining subnational capital status has a sizable effect on city growth in the medium run. We provide new evidence that the effect of these reforms depends on locational fundamentals, such as market access, and that the effect is greater in countries where urbanization and industrialization occurred later. Consistent with both an influx of public investments and a private response of individuals and firms, we document that urban built-up, population, foreign aid, infrastructure, and foreign direct investment in several sectors increase once cities become subnational capitals.

Development via Administrative Redistricting

Ricardo Dahis
,
Pontifical Catholic University of Rio de Janeiro
Christiane Szerman
,
Princeton University

Abstract

We study how administrative redistricting promotes local development. Exploiting a large episode of voluntary municipality splits in Brazil and a rich panel of administrative and spatial data, we compare paths of development between areas that split and those that did not. We find that splitting had broadly positive effects, with any potential loss of scale from smaller governments being at least partially compensated by extra federal transfers new municipalities received. We find that splitting led to an expansion of the public sector, improvements in public service delivery, and increases in economic activity in new municipalities. We show that autonomy and reductions to administrative distance help explain results beyond simply gains in revenue. Our findings illustrate that decentralization in form of subsidized voluntary administrative redistricting can improve public service delivery in disadvantaged areas.

Cultural Distance and Ethnic Civil Conflict

Eleonora Guarnieri
,
University of Exeter

Abstract

Ethnically diverse countries are more prone to conflict, yet we lack an understanding of why some groups engage in conflict and others do not. In this paper, I argue that civil conflict is explained by ethnic groups’ cultural distance to the central government: an increase in cultural distance increases an ethnicity's propensity to fight over government power. To identify this effect, I leverage within-ethnicity variation in cultural distance to the government resulting from power transitions between ethnic groups over time. I validate my findings in a triple difference-in-differences design using ethnicities partitioned across countries, and through a novel instrumental variables approach. As an instrument for cultural distance, I use differences in ethnic homelands’ exposure to the route of the Bantu expansion, a prehistoric migration that shaped culture in sub-Saharan Africa. I show that differences in preferences over public goods are the mechanism driving the effects of cultural distance on conflict. First, cultural distance triggers only conflict over government power, but not conflict over territory or resources. Second, using individual-level survey data, I find that respondents dislike the mix of public policies provided by a culturally distant government. By shedding light on which ethnic groups are more likely to rebel at a given point in time, these findings can inform strategies to target conflict prevention efforts.

Discussant(s)
Paul Schaudt
,
University of St. Gallen
Ricardo Dahis
,
PUC-Rio
Eleonora Guarnieri
,
University of Exeter
Filipe Campante
,
Johns Hopkins University
JEL Classifications
  • P0 - General
  • R0 - General