Essays in Political Economy and Institutions

The first chapter of my dissertation studies the 2011 student movement in Chile, the largest protest mobilization in the country's history, in which hundreds of thousands of students skipped school to protest with the goal of reforming the educational system. Using administrative data on millions of students' daily school attendance decisions on protest and non-protest days, a large network composed by the lifetime history of classmates, and differential network exposure to the first national protest, I employ an instrumental variables approach to test how networks affect protest behavior. The main finding is that individual participation follows a threshold model of collective behavior: students were influenced by their networks to skip school on protest days only when more than 40 percent of the members of their networks also skipped school. Additional findings show that protest participation imposed significant educational costs on students and helped to shift votes towards non-traditional opposition parties. Taken together, results indicate that networks amplify the effect of protests in non-linear ways with potentially significant consequences for institutional change.The second chapter, co-authored with Jose Ignacio Cuesta and Cristi'an Larroulet, investigates the workings of educational institutions in Chile. In education, data on school quality is often gathered through standardized testing. However, the use of these tests has been controversial because of behavioral responses that could distort performance measures. We study the Chilean educational market and document that low-performing students are underrepresented in test days, generating distortions in school quality information. These distorted quality signals affect parents' school choice and induce misallocation of public programs. These results indicate that undesirable responses to test-based accountability systems may impose significant costs on educational markets.The third chapter, co-authored with Mounu Prem, studies firms during Chile's transition to democracy. Political transitions are associated with significant economic changes, but little is known about how firms fare across regimes. We study Chile's democratization and show that firms in the dictator's network make critical investments in physical capital during the political transition. These investments are made possible by government banks during the dictatorship and allow firms to improve their market position in the new regime. Our results show how market distortions can be transferred across political regimes