Selectorate Politics, Revolutions and Pernicious Foreign Aid

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Selectorate Politics, Revolutions and Pernicious
Foreign Aid

• Bruce Bueno de Mesquita
• Alastair Smith
• NYU

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Aid has not helped
Average level of Democracy (and 95 confidence)
for nations US assists, and those it leaves alone
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Political Economy Model of Public Policy and
Institutional Choice

• General Model
• Leaders seek to survive multiple threats to
  survival
• Internal Political Competition within Extant
  Rules Selectorate Politics
• Mass Political Movements Revolution to recast
  institutions as more inclusive
• Coup Institutional Change Orchestrated by
  insiders
• Policy choice to survive
• Institutional Preferences
• How do groups want to change institutions?
• Substantive Application Foreign Aid

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Selectorate Model

• Selectorate politics
• Office seeking leaders use private (z) and public
  (g) goods to reward supporters
• Leader needs to maintain the support of W
  supporters from a pool of S potential supporters
• Large W induces public goods focus
• Small W induces private goods focus, loyalty norm
  and easy leader survival

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Role of Public Goods

• Rewards to supporter (and the rest of society)
• Enhance Productivity
• Budget Constraint
• Coordination and Organization
• Improve the probability of revolutionary success
  
• Coordination vs normal public goods

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• The Political Survival and Policy Game
• Coalition and policy proposals
• Incumbent proposes (g,z), challenger (gc,zc),
  revolutionary (gD,zD)
• Selectorate competition
• Revolutionary threat
• Citizens choose whether to rebel, if so they
  succeed with probability ?(g)
• Future expected payoff is ?
• Policy implementation, work and affinity
  revelation

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Equilibria

• Find MPE in which leaders provide (g,z) to W
  highest affinity selectors and survive
• Selectorate competition
• Challengers immediate best offer
• Challengers long term offer

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Selectorate Constraint

• Absent a revolutionary threat
• First Order Condition

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Policy and Institutions

• Public goods increase in W
• Overall spending decreases in S

High R
Low R
Public goods,g
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Revolutionary Threat

• Expected value of revolution, ?
• Probability of success, ?(g)
• Cost of rebelling, k

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Revolutionary Constraints
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Proposition
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Contraction vs. Expansion

• Expansion of g
• Increase economy
• Reduce private goods
• Reduce Loyalty work harder
• Small R, relatively large W
• Contraction of g
• Contract economy
• Need extra private goods (hard without Free
  resources)
• Increase Loyalty --- reduce overall spending
• Small W, large R

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Leaders Welfare
Contraction
Case 1
Case 1
Expansion
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Coalition Welfare

• Expansion
• Public goods focus
• More resources
• Lower Loyalty
• Leader works harder
• Contraction
• Private goods focus
• Contracted economy
• Greater loss from coalition exclusion
• Greater loyalty

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Coalition Prefers Expansion to Contraction
Contraction
Expansion
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Citizens Welfare
Expansion
Contraction
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Institutional Change

• Leader (nearly) always want to contract W
• Exception in expansion region
• Small W really valuable when R high (free
  resources)
• Outsiders (weakly) want to expand W
• But preferences flat when revolution constrains
  policy choice
• At this point they dont care what goes on at the
  palace!

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Coalition Desired Institutional Change

• At High W
• Want increase in W
• At Low W
• Support contraction of W, BUT only if retained
• Affinity revelation is critical
• Coalition never supports a contraction of W with
  probabilistic inclusion in case 1 (or expansion)
• Fait a Compli coalition change
• Less opposition to reducing W when policy
  response to rebellion is contraction

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Pernicious Effect of Aid

• Increase free resources
• Increase incentive for revolutionary
  change
• Increase contraction/expansion of public goods
• Increase leader desire for small W
• (in contraction) lessen coalition objections to
  reduction of W

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Policy Response to Aid
Expansionary response to revolutionary threat
Large W
Small W
Contractionary response to revolutionary threat
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Democratization

• Behavioral vs Institutional democracy
• If leader contracts public goods then behavioral
  aspects of democracy erode
• Likely at high R
• Test of Institutional Change
• Absent Revolutionary Threat little change
• Coalition, citizens and leader never align
• Revolutionary threat
• Contractionary incentives for leader and possibly
  coalition attractive at high R

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Substantive Effect of Oil and Aid

• When leaders face a revolutionary threat in a
  small W system
• 3 Aid/GDP reduces Polity score by 4.1
• 1 Std.Dev. increase in Oil exports reduces Polity
  score by 6.6

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Out of Sample test Changes in Governance since
1999, Free Resources, and Revolutionary Threats
for nations with high free resources
High Resources foreign aid in excess of 3 of
GDP or oil at more than one standard deviation
above the 1999 mean
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Conclusion

• Multiple threats to leader survival
• Free resources affects
• Which threats are binding constraints on policy
• Best policy response
• Foreign Aid/ Resource Curse
• Resources to finance public goods production
• In large W Aid promotes public goods
• In small W Aid rewards leader and coalition
• Increases revolutionary threat which encourages
  public goods suppression

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Some Preliminary Empirical Tests

• Institutions W or (Polity10)/20
• Free Resources Aid, Oil
• Revolutionary threat index
• Bankss Cross-National time Series data
• the change in the number of anti-government
  demonstrations between t0 and t-5
• the change in the number of Riots (t0 - t-5)
• the change in the number of general strikes (t0
  t-5)
• the change in the number of assassinations or
  attempted assassinations of high level government
  officials (t0 t-5)
• the change in the number of revolutions during
  the preceding five years (t0 t-5).
• Sum standardized variables (mean 0, SD1) divided
  by 5

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• Coordination Goods Public goods which assist
  rebel coordination
• Freedom Houses Civil Liberties
• Logarithm of the number of radios
• Logarithm of general strikes
• Dummy for whether government reports tax data
• Sum standardized variables/4
• Standard public goods, such as health care,
  exhibit much weaker dependence.

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Coordination Good(t5)
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Dependent Variable W(t5) or Democracy-Autocracy(
t5)
Cell entries are Coefficient (Standard Error) and
probability (2-tailed).
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Conclusion

• Policy is a survival response to multiple threats
• Institutions and Economic structure
• Model Revolutionary change (and coups)
• Towards a theory of endogenous institutional
  change