Abstract
Hereditary leadership has been an important feature of the political landscape throughout history. This paper argues that hereditary leadership is like a relational contract which improves policy incentives. We assemble a unique dataset on leaders between 1874 and 2004 in which we classify them as hereditary leaders based on their family history. The core empirical finding is that economic growth is higher in polities with hereditary leaders but only if executive constraints are weak. Moreover, this holds across of a range of specifications. The finding is also mirrored in policy outcomes which affect growth. In addition, we find that hereditary leadership is more likely to come to an end when the growth performance under the incumbent leader is poor.
Notes
See Besley (2006) for a review of the political agency literature.
This increases to 9 and 11% respectively if we use a broader definition of dynastic leader.
An “Online Appendix” contains some additional results.
Archigos has two datasets: one which gives information on leader, year and country, and one which gives information only on leader and country. In the latter there are 95 leader-country observations that do not appear in the former. In our analysis, we include these 95 observations which are for the following countries: Barbados, Bahamas, Belize, Brunei, Cape Verde, Iceland, Luxemburg, Maldives, Malta, Montenegro, Solomon Islands, Suriname, Tiber, Transvaal, Zanzibar. We extend the data back to 1848 for a few countries. Many countries have more than one “head of state”. The Archigos dataset identifies the actual effective ruler based on a judgement about the particularities of each country. Two rules are generally followed: (i) in Parliamentary regimes, the prime minister is coded as the ruler, while in Presidential systems it is the president; (ii) in communist states the Chairman of the Party is coded as the effective ruler.
In cases where more than one leader is in office in a given year, we focus on the leader who has been in office for the longest time period during the year.
This broadly similar to the findings for the U.S Congress where Dal Bo et al. (2009) find that the 8.7% of new entrants have a previous political connection using data between 1789 and 1996. They also find that this proportion has not fallen much over time.
It is interesting to relate whether a politician is dynastic to opportunities to replace leaders as captured by three PolityIV variables: (i) the extent of institutionalization—or regulation—of executive transfers (XRREG), (ii) the competitiveness of executive selection (XRCOMP), and (iii) the openness of executive recruitment (XROPEN). This summary variable takes values between 1 and 8, with 8 being the most open and competitive method of selection. This variable is strongly correlated with our measure of whether a politician belongs to a political dynasty. Around 3% of leaders are from dynasties in the political systems where the value of this dummy variable is 8 compared to 10% for the sample where the value of this variable is less than 8.
See Besley and Mueller (2015) for a model along these lines.
See Besley et al. (2016) for discussion of theory and evidence on selecting strong execitive constraints.
That said, if \(\xi \) get’s low enough so that executive constraints are highly ineffective, then it is possible that a dynastic equilibrium could emerge even when there are strong executive constraints.
The “Online Appendix” shows that dynastic leadership is reinforced by natural disasters suggesting that there are times when citizens crave familiarity among their leadership.
This specification is fairly standard for a growth regression in panel data. The long time series (an average of 11 observations, i.e., leaders per country) means that the standard dynamic bias from including lagged income should not be an issue.
The “Online Appendix” reports the results of an empirical exercise where the gender composition of first-born children is used to predict successful hereditary transitions in monarchies. Since all monarchies have weak executive constraints, this has a more limited link to the theory. The results show that whether the first born is male is indeed correlated with a successful hereditary transition.
We normalize the variable to lie between zero and one with higher values representing more effective policies to support markets.
We chose this criterion so that we do not lose leaders whose spell in office ends after 1995.
We also attempted to update this variable to 2008. However, some of the variables in the original ICRG are no longer reported. However, we can construct something which is fairly close; specifically we take the average of corruption, law and order, quality of bureaucracy and investment profile, normalized to lie between zero and one. Expropriation risk and repudiation of contracts have been replaced in the later data by a new investment profile variable. If we repeat the specifications of columns (1) through (2) of Table 6, the results with country dummies are weak, but with regional dummy variables, the results are similar to those in columns (1) and (2).
We normalize the measure to lie between zero and one with higher values representing better quality infrastructure.
We chose this criterion so as not to lose from the sample those leaders whose spell in office ends after 1990.
Table A1, A2 and A3 in the “Online Appendix” report results based on a range of different policy outcome varibles. However, we do not find significant effects of heteridary leadership.
Our model does not predict when this might come to an end even if a country is in the hereditary equilibrium of Proposition 2. However, it would be difficult to modify the theory to have this possibility. One device would be to invoke some kind of “trembling hand” in equilibrium play with some leaders failing to deliver to choose good policies even when it is in their interest to do so. Another possibility would to invoke competence shocks which impair the ability of some hereditary leaders to deliver. In such cases, there will be low growth according to our model and hereditary leaders will not succeed in passing on the office to their offspring.
Our model of hereditary leadership has multiple equilibria. Hence whether a hereditary leader emerges with weak executive constraints is an equilibrium selection issue. In this world social conventions can play a coordinating role and could plausibly be orthogonal to other factors which affect growth, particularly once country fixed-effects are included. In the “Online Appendix”, we report results based on two different IV approaches aimed at addressing the concern that there are systematic factors which could affect whether dynastic selection persists. The first is to look at exogenous shocks from natural disasters showing that these are correlated with dynastic selection. Second, we exploit primogeniture conventions in monarchies. In both cases, we get robust results.
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Besley is grateful for funding from Martin Newson, the ESRC and CIFAR. Reynal-Querol is grateful for funding from the European Research Council under the European Community’s Seventh Framework Programme (ERC Grant Agreement No. 647514 and acknowledges the financial support of the grant ECO2014-55555-P from the Spanish Ministerio de Educación. Reynal-Querol also acknowledges the support of the Barcelona GSE Research Network and the Government of Catalonia.
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The authors thank the editor and referees for their comments and feedback. They are also grateful to Florencia Abiuso for her excellent research assistance, Gerard Padro-i-Miquel and Maria Lopez-Uribe for their comments on an earlier draft and Fred Finan for helpful discussion early in the project. A number of seminar audiences have provided useful feedback on this work.
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Appendix
Appendix
Proof of Proposition 1
Consider the first case and suppose that \({\hat{e}}\left( s\right) \ne s\), and all unpopular leaders are removed from office after one period. The value to the selectorate along the equilibrium path is \(\frac{\rho A+\left( 1-\rho \right) {\bar{A}}\left( \rho \right) +\Delta }{1-\beta }\). Let
Retaining popular incumbent yields \(W\left( A\right) .\) Deviating by removing such an incumbent makes the selectorate worse off since \(W\left( A\right) >W\left( {\bar{A}}\left( \rho \right) \right) \). Now consider whether there could be a worthwhile deviation by retaining an unpopular incumbent rather than picking a new incumbent at random. This will not be the case either since \(W\left( -A\right) <W\left( {\bar{A}}\left( \rho \right) \right) \). Hence there is no worthwhile one-shot deviation for the selectorate. Since the probability that an incumbent is retained is independent of \(\delta \), it is optimal for all incumbents to set \(e\ne s\) for all \(c>0\). \(\square \)
Proof of Proposition 2
We first show that it is optimal for the selectorate in such cases to retain the offspring of leaders in this case if they produce \(\Delta \) when the out-of-equilibrium beliefs are that if the leader choose \(e\ne s\), then there is an infinite reversion to playing the benchmark equilibrium where \( e\ne s\) for all leaders and only popular leaders are retained. In the benchmark equilibrium, the payoff along the equilibrium is
In the proposed hereditary equilibrium, the payoff is:
Suppose now that the incumbent leader has an unpopular offspring then retaining that individual is optimal if
which reduces to the condition above. Clearly, if this condition holds, it will hold a fortiori if the incumbent’s offspring is popular. This equilibrium exists as long as \(\left( 1-\rho \right) B\ge c\) . This is because if the incumbent deviates to \(e\ne s\), then his incumbent will be retained in office with probability \(\rho \). However, if he chooses \(e=s\), then his offspring will hold office for sure. \(\square \)
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Besley, T., Reynal-Querol, M. The logic of hereditary rule: theory and evidence. J Econ Growth 22, 123–144 (2017). https://doi.org/10.1007/s10887-017-9140-4
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DOI: https://doi.org/10.1007/s10887-017-9140-4