Essays on the Political Economy of Economic Development

Democratic institutions are intended to hold politicians accountable to voters. By expanding input into the policy-making process, democratic elections may broaden the coalition of citizens benefiting from state policy. When institutions are sufficiently strong, democracy may promote economic development in ways that are less likely to happen when the poorest citizens are disenfranchised. When institutions are in more nascent states, democratic systems are often captured by economic elites, undermining this potential for poverty alleviation. Often, poverty itself is used as leverage to lock poorer voters into transactional relationships with the state, undermining political incentives to invest in more substantive programmatic policy. This dissertation examines precisely these dynamic tensions between poverty, institutions, and political accountability. In the chapters that follow, I test the ways that democratization, decentralization, and public funding mechanisms can help improve - or sometimes undermine - political accountability and subsequent economic development outcomes. I begin by studying the introduction of democratic elections - perhaps the most important institution thought to hold politicians accountable to citizens. My first dissertation chapter examines interactions between nascent political parties and newly enfranchised voters following Indonesia's democratization, leveraging the unique staggering of democratic appointments across districts for identification. By tracking outcomes across local governments, event study estimates compare the allocation of resources with and without an elected politician in office, at the same point in time, within the same broader institutional context. When elected district heads take office, night light growth is 2.6 percentage points greater across villages supporting the winning political party - an effect that's driven by districts with stronger media presence and political competition in the baseline. These effects, however, are not associated with improvements in local public goods. Disparities in night light growth are more pronounced during village head election years, suggesting that village officials - in addition to voters - are targeted with preferential favors by elected district administrations. Taken together, results suggest that democratization reshapes political responsiveness across new voter constituencies, but may do so through new clientelist systems rather than broader investment in public goods.Results highlight the promises and pitfalls of democratic elections in aligning politician behavior with voter priorities. While leaders are forced to respond to new voters to maintain winning coalitions, this responsiveness may be more transactional in nature, and may not translate into substantive development outcomes. In a variety of ways, the remainder of this dissertation explores this tension, asking under which sets of incentives and public funding schemes politicians will prioritize meaningful programmatic changes over transactional or self-enriching behavior. In this vein, my second dissertation chapter asks whether reelection incentives - normally considered to hold politicians accountable to voters - may be exploited by higher-level politicians to coerce political allegiance. It leverages staggered village head election timing prior to Indonesia's democratic transition, testing whether more proximate village head elections induce greater village-level support for the autocratic regime. Results find that each additional year of proximity to village head elections yields a one percentage point increase in support for the central administration - a result that disappears when village heads are not eligible for reelection. These findings suggest that local politicians may generate electoral support for the central administration in exchange for help with local reelection campaigns. Additional evidence is consistent with this interpretation: I find that government transfers to villages increase during village head election years, and village support for winning district politicians is associated with lower rates of subsequent village head turnover. Across both of the chapters detailed above, government transfers allow politicians to target benefits towards aligned voters and politicians. Often, decentralized revenues are thought to counteract this effect, improving local development outcomes by putting funding and decision-making power in the hands of local voters who best understand their own development needs. In my third dissertation chapter I test conditions under which a large decentralization reform was able to generate meaningful improvements in local development outcomes. This analysis exploits a reform that increased village revenue by roughly 400 percent across more than 70,000 Indonesian villages. I test the extent to which village head elections improved subsequent development outcomes following the reform, using a full census of village data to measure local infrastructure improvements. I find significant complementarities between decentralized revenues and local village elections. Elections allowed villagers to replace underperforming village heads following the reform, leading to stronger local governance outcomes, better-educated village leaders, and improvements in a range of local infrastructure measures. While recent empirical literature highlights the potential for revenue windfalls to undermine political accountability, these findings provide evidence that local accountability measures can help channel revenue streams into productive uses. Results throughout this dissertation highlight the potential for institutional strengthening to promote economic development. They also make clear the complex, dynamic relationships between poverty, institutions, and political responsiveness. It is my hope that these chapters lay the foundation for my own future work at this intersection, helping to leverage policy interventions to promote more equitable and sustainable economic growth