Voters often dismantle constitutional checks and balances on the executive. If such checks and balances limit presidential abuses of power and rents, why do voters support their removal? We argue that by reducing politician rents, checks and balances also make it cheaper to bribe or influence politicians through non-electoral means. In weakly institutionalized polities where such non-electoral influences, particularly by the better organized elite, are a major concern, voters may prefer a political system without checks and balances as a way of insulating politicians from these influences. When they do so, they are effectively accepting a certain amount of politician (presidential) rents in return for redistribution. We show that checks and balances are less likely to emerge when the elite is better organized and is more likely to be able to influence or bribe politicians, and when inequality and potential taxes are high (which makes redistribution more valuable to the majority). We also provide case study evidence from Bolivia, Ecuador, and Venezuela consistent with the model.

We study the dynamic selection of governments. A government consists of a subset of the individuals in the society. The competence level of the government in o ce determines collective utilities (e.g., by determining the amount and quality of public goods), and each individual derives additional utility from being part of the government (e.g., corruption or rents from holding o ce). We characterize the dynamic evolution of governments and determine structure of stable governments, which arise and persist in equilibrium. Our main focus is on the impact of di erent political institutions on the selection of governments. Perfect democracy, where current members of the government do not have an incumbency advantage or special powers, always leads to the emergence of the most competent government. However, any deviation from perfect democracy destroys this result. There is always at least one other, less competent government that is also stable and can persist forever. In addition, even the least competent government can persist forever in o ce. When there are stochastic shocks to the competence levels of di erent governments or to the rules determining the election of new governments, political institutions with a greater degree of democracy (less power for incumbents) are shown to perform better, because they can adapt to changes more successfully. This suggests that a particular advantage of democratic regimes is their relative exibility. We also show that, in the presence of stochastic shocks, \\royalty-like" dictatorships may be more successful than \\junta-like " dictatorships, because they might also be more adaptable to change.

Among countries colonized by European powers during the past 500 years, those that were relatively rich in 1500 are now relatively poor. We document this reversal using data on urbanization patterns and population density, which, we argue, proxy for economic prosperity. This reversal weighs against a view that links economic development to geographic factors. Instead, we argue that the reversal reflects changes in the institutions resulting from European colonialism. The European intervention appears to have created an “institutional reversal” among these societies, meaning that Europeans were more likely to introduce institutions encouraging investment in regions that were previously poor. This institutional reversal accounts for the reversal in relative incomes. We provide further support for this view by documenting that the reversal in relative incomes took place during the late eighteenth and early nineteenth centuries, and resulted from societies with good institutions taking advantage of the opportunity to industrialize.

We document a statistical association between the severity of the persecution, displacement and mass murder of Jews by the Nazis during World War II and long-run economic and political outcomes within Russia. Cities that experienced the Holocaust most intensely have grown less, and both cities and administrative districts (oblasts) where the Holocaust had the largest impact have worse economic and political outcomes since the collapse of the Soviet Union. We provide evidence that the lasting impact of the Holocaust may be attributable to a permanent change it induced in the social structure across different regions of Russia.

We study the (perfect Bayesian) equilibrium of a sequential learning model over a general social network. Each individual receives a signal about the underlying state of the world, observes the past actions of a stochastically generated neighbourhood of individuals, and chooses one of two possible actions. The stochastic process generating the neighbourhoods defines the network topology. We characterize pure strategy equilibria for arbitrary stochastic and deterministic social networks and characterize the conditions under which there will be asymptotic learning—convergence (in probability) to the right action as the social network becomes large. We show that when private beliefs are unbounded (meaning that the implied likelihood ratios are unbounded), there will be asymptotic learning as long as there is some minimal amount of “expansion in observations”. We also characterize conditions under which there will be asymptotic learning when private beliefs are bounded.

This paper analyzes the relationship between the diffusion of new technologies and the decentralization of firms. Centralized control relies on the information of the principal, which we equate with publicly available information. Decentralized control, on the other hand, delegates authority to a manager with superior information. However, the manager can use his informational advantage to make choices that are not in the best interest of the principal. As the available public information about the specific technology increases, the tradeoff shifts in favor of centralization. We show that firms closer to the technological frontier, firms in more heterogeneous environments, and younger firms are more likely to choose decentralization. Using three data sets on French and British firms in the 1990s, we report robust correlations consistent with these predictions.