Regional favoritism and development
Final Report Abstract
Anecdotal evidence suggests that political dysfunctionalities lie at the heart of underdevelopment. The goal of our project was to study in detail how regional favoritism, an important form of political dysfunction, affects economic outcomes. The project has has led, up to now, to five working papers. In Regional favoritism and human capital accumulation in Africa, we explore who benefits from regional favoritism. Specifically, we study how favoritism in Africa affects educational attainment, an important “investment” into human capital accumulation and a long-run determinant of individual welfare. We find that men have higher educational attainment as adults if they had lived in the birth region of the incumbent national leader during their youth. In contrast, womens’ educational attainment does not increase due to regional favoritism. In "Favoritism and Firms: Micro evidence and macro implications", we study the detailed micro effects of favoritism at the firm-level and subsequently explore the aggregate effects for the economy as a whole. We show that firms located in favored regions become more productive in terms of output per labor and estimated total factor productivity. We also find that the effects on firm size and productivity are driven by firms in the non-tradable sector, implying that favoritism is a demand shock. In "Regional redistribution of mineral resource wealth in Africa", we study the spatial implications of mineral resources across Africa. For example, regional favoritism may come into play when governments decide on revenue-sharing schemes for mineral resource rents. Our findings indicate that mineral resource activity indeed affects economic outcomes in non-mining regions. In particular, we find that capital cities witness an increase in economic activity from mine openings elsewhere. Leaders’ birth regions also benefit from mineral resource activity if the country is an autocracy. In "Political favoritism and internal migration in Benin", we study whether regional favoritism induces in-migration to connected regions using granular census data from Benin for the period 1991-2013. We find that favored regions experience in-migration. This finding indicates that the distributional implications of favoritism within the favored region might be heterogeneous. In "Favoritism by the governing elite", we use a unique hand-collected dataset on about 12,300 cabinet members (from 141 countries over the period 1992-2016 ) to study regional favoritism at the ministerial level across the globe. Specifically, we explore whether regional connections to a cabinet minister has similarly beneficial economic consequences as connections to the national leader. We find that connections to cabinet members cause on average an expansion of economic activity. However, the effects vary across continents. We find statistically significant evidence for regional favoritism by cabinet members only within Africa.
Publications
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Favoritism and Firms: Micro Evidence and Macro Implications. SSRN Electronic Journal.
Asatryan, Zareh; Baskaran, Thushyanthan; Birkholz, Carlo & Gomtsyan, David
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Regional Favoritism and Human Capital Accumulation in Africa. SSRN Electronic Journal.
Asatryan, Zareh; Baskaran, Thushyanthan; Hufschmidt, Patrick & Stoecker, Alexander
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Regional Redistribution of Mineral Resource Wealth in Africa. SSRN Electronic Journal.
Asatryan, Zareh; Baskaran, Thushyanthan; Birkholz, Carlo & Hufschmidt, Patrick
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Favoritism by the Governing Elite. SSRN Electronic Journal.
Asatryan, Zareh; Baskaran, Thushyanthan; Birkholz, Carlo & Hufschmidt, Patrick
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Political favoritism and internal migration in Benin. Ruhr Economic Papers 1031.
Baskaran, T., P. Hufschmidt & A. Stöcker
