Dissertation and Book Project
Protecting Capital: Economic Elites, Asset Portfolio Diversification, and the Politics of Distribution
- Recipient of the 2019 Mancur Olson Award for the Best Dissertation in Political Economy in the previous two years given by the American Political Science Association
Working Papers
1. "Landowners, Capitalists and Bankers: The Political Economy of Business Influence"
- Recipient of the Early Career Award for the Best Paper Delivered by a Graduate Student in the 2018 MPSA Conference
What explains economic elites’ choice of mechanisms to protect their capital? Existing approaches to economic elites’ influence and their role in distributive struggles explicitly or implicitly assume that elites identify with a single economic activity. Some of these theories consider this group’s interests as cohesive, whereas others emphasize factoral, sectoral, industry or firm cleavages. In contrast, I make the point that to explain why members of the economic elite choose different political strategies to advance their policy interests it is necessary to disentangle the diversification structure of their asset portfolio. I argue that investors’ asset portfolio structure accounts for variation in their motivations to influence different types of policy outcomes and, therefore, to invest in different political strategies. I test my argument in Argentina between the mid-nineteenth and late-twentieth centuries using original individual-level data gathered from previously untapped historical archives. I show that diversified economic elites are more likely to participate directly in politics occupying elected and appointed positions in government, participating in encompassing employer organizations, and to embed themselves into elitist social circles, whereas those who are specialized in a single sector tend to resort to non-encompassing business associations to advance their interests. I explain that the choice of such strategies is a consequence of the effectiveness that each of these has in shaping different policy arenas: whereas diversified investors need to influence macro-level policies to protect their investments in multiple sectors, specialized ones prioritize policies that affect their sector alone. These findings suggest that the asset portfolio diversification of the economic elite has consequences for the balance on representation in democratic institutions with important implications for the design and implementation of policies that shape development and redistribution.
2. "Insuring Against Democracy: The Political Economy of Premodern Elites Asset Portfolio Diversification"
Does land inequality undermine democratization and development? The dominant consensus is that land inequality provides incentives for landed elites to block democratization and undermines the provision of public goods. Two key assumptions underlie these theoretical accounts: that landowners identify uniquely with land-related activities and that asset mobility is exogenous. In this paper, I propose an alternative explanation on how land inequality affects landed elites' calculations on both democracy and the provision of public goods that breaks with these assumptions. I argue that the creation of domestic financial markets unevenly transformed the asset portfolios of landed elites exposed to different levels of land inequality, reshaping their political and economic incentives. Using previously untapped archival data that allows me to identify landholdings and participation in joint-stock companies of 55,504 elite members, I exploit the approval of the first corporate law that regulated joint-stock companies in Chile in 1854 to show that, given the emergence of new investment opportunities, landed elites that perceived a higher economic risk under democracy strategically hedged such risk by diversifying their holding portfolio into other economic activities. As a consequence, on the one hand, landed elites that insured their capital through portfolio diversification became more supportive of suffrage expansion. On the other hand, diversification of economic interests also produced incentives for diversified elites to seek positions in government at the national level from which they could steer state intervention towards policies with a multiplier effect across the different sectors of the economy where they had investments. Ultimately, the interest of diversified elites in this type of policies resulted in higher investments in public goods in their districts. This set of findings challenges the idea that land inequality has detrimental consequences for democratization and development, and provides novel evidence supporting the argument that initial high levels of land inequality can lead to prosperity.
3. "Moving Markets? Government Bond Investors and Microeconomic Policy Changes" (with Layna Mosley and Erik Wibbels), Revise & Resubmit
Do sovereign bond markets react systematically to microeconomic policy reforms? Some observers suggest that investors are very attentive to supply-side policies such as those related to labor markets, corporate taxation and product standards. They argue that, along with macroeconomic outcomes and broad financial market conditions, such reforms affect sovereign bond premiums, for developed as well as emerging economies. In contrast, we predict few systematic effects of supply-side policy reforms on sovereign bond market outcomes. Our theory draws on a standard three-equation model of the economy, widely accepted among economic and finance professionals. That model makes few clear predictions regarding the anticipated effects of microeconomic policy changes; as a result, we expect that such reforms will not generate systematic market reactions. Our analyses, based on daily data from 37 countries from 2004 to 2012, indeed reveal little evidence of a systematic bond market reaction to the 47 most significant reforms to corporate taxation and labor market regulation. These results call into question the notion that "bond market vigilantes" play a central role in compelling governments to enact specific microeconomic policy changes.
4. "When Clients Elect Brokers. Elections, Participation, and Public Goods Provision in Urban Slums", under review
Does democracy improve public goods provision for the poor? This paper considers whether and how the introduction of democratic elections in poor urban areas governed by clientelistic relations affects the provision of basic public goods and services. To address this question I take advantage of an interruption in the judicial process that introduced elections to select slum-level representatives in Argentina. Drawing on an original household survey, an expert survey, and insights from in-depth interviews, I show that the combination between electoral democracy and high organizational density enhances public goods and services provision in these poor settlements. In such context, existing organizational structures and citizens’ organizational experience facilitate individuals’ endeavors to demand and monitor the provision public goods, and the emergence of new leaders that skew political competition towards the provision of public goods. However, a vigorous civic life is not always beneficial. Where slum leaders are not elected, organizations may be used for clientelism purposes, voiding the positive effect of participation on public goods provision.
5. "Resource Endowments, Elite Competition, and Inclusive Political Institutions" (with Jan Vogler), under review
Recent work on the creation of institutions suggests that the composition of elites has consequences for the design of legal frameworks, tax regimes, and electoral systems. We contribute to this literature by explaining variation in the establishment of political power-sharing institutions, particularly horizontal and vertical accountability mechanisms. Different from previous elite-based arguments, we propose that it is not the mere presence of competition among elite groups, but the balance of power between them, that explains the establishment of political accountability mechanisms. We use an original measurement on geological resource diversity as an instrument for intra-elite balance of power, as proxied by levels of market concentration, to estimate the latter’s effect on institutional design. Our cross-national analysis shows that where geological resources are more diverse, competition be- tween similarly powerful groups within the economic elite is more likely to emerge, leading ultimately to the establishment of accountability mechanisms that allow elite groups to protect their diverging interests. We illustrate the inter-temporal dynamics of our argument through two historical case studies.
Work in Progress
1. "State Capacity and the Distributive Consequences of Commodity Booms" (with Pablo Beramendi and Melissa Rogers) [early draft available upon request]
2. "Elites, Enfranchisement and Redistribution" (with Valentín Figueroa and Marcelo Leiras) [early draft available upon request]
3. "Land Inequality Perceptions and the Demand for Redistribution. Experimental Evidence from Rural Colombia" (with Germán Feierherd and Ana Montoya) [data analysis stage]
4. "Estimating the Effect of Bribes in Policy Positions in Brazil" (with Marco Morucci) [data collection stage]
2. "Elites, Enfranchisement and Redistribution" (with Valentín Figueroa and Marcelo Leiras) [early draft available upon request]
3. "Land Inequality Perceptions and the Demand for Redistribution. Experimental Evidence from Rural Colombia" (with Germán Feierherd and Ana Montoya) [data analysis stage]
4. "Estimating the Effect of Bribes in Policy Positions in Brazil" (with Marco Morucci) [data collection stage]