Autocrats in many developing countries have extracted enormous personal rents from power. In addition, they have imposed inefficient policies including pervasive patronage spending. I present a model in which the presence of ethnic identities and the absence of institutionalized succession processes allow the ruler to elicit support from a sizeable share of the population despite large reductions in welfare. The fear of falling under an equally inefficient and venal ruler that favours another group is enough to discipline supporters. The model predicts extensive use of patronage, ethnic bias in taxation, and spending patterns and unveils a new mechanism through which economic frictions translate into increased rent extraction by the leader. These predictions are consistent with the experiences of bad governance, ethnic bias, wasteful policies, and kleptocracy in post-colonial Africa.

We consider a game between a principal, an agent, and a monitor in which the principal would like to rely on messages by the monitor (the potential whistleblower) to target intervention against a misbehaving agent. The difficulty is that the agent can credibly threaten to retaliate against the monitor in the event of an intervention. In this setting, intervention policies that are responsive to the monitor’s message provide informative signals to the agent, which can be used to target threats efficiently. Principals that are too responsive to information shut down communication channels. Successful intervention policies must therefore garble the information provided by monitors and cannot be fully responsive. We show that policy evaluation on the basis of non-verifiable whistleblower messages is feasible under arbitrary incomplete information provided policy design takes into account that messages are endogenous.

This article characterizes optimal policy when a government uses indirect control to exert its authority. We develop a dynamic principal-agent model in which a principal (a government) delegates the prevention of a disturbance–such as riots, protests, terrorism, crime, or tax evasion–to an agent who has an advantage in accomplishing this task. Our setting is a standard repeated moral hazard model with two additional features. First, the principal is allowed to exert direct control by intervening with an endogenously determined intensity of force which is costly to both players. Second, the principal suffers from limited commitment. Using recursive methods, we derive a fully analytical characterization of the intensity, likelihood, and duration of intervention. The first main insight from our model is that repeated and costly equilibrium interventions are a feature of optimal policy. This is because they are the most efficient credible means for the principal of providing incentives for the agent. The second main insight is a detailed analysis of a fundamental trade-off between the intensity and duration of intervention which is driven by the principal's inability to commit. Finally, we derive sharp predictions regarding the impact of various factors on the optimal intensity, likelihood, and duration of intervention. We discuss these results in the context of some historical episodes.

In 2002, U.S. President George W. Bush initiated the deployment of a new ballistic missile defense system. 1 The move triggered vociferous international concerns, including a recent statement of Russia and China condemning U.S. plans as a destabilizing move. 2 Indeed, the move amounts to a withdrawal from the 1972 Anti-Ballistic Missile treaty. The U.S. position is that such missile defense systems only reduce the damage caused by an incoming strike, and therefore do not threaten international stability. This paper provides a careful formal analysis of how the unilateral acquisition of defensive weapons may affect the sustainability of peace. We consider a dynamic game in which two symmetric countries repeatedly decide to be peaceful or to attack. Peace is sustained in equilibrium by trigger strategies in which attacks are followed by permanent conflict. Under complete information, peace is sustainable if and only if the value of continued peace is greater than the temptation of launching a surprise attack. Because defensive weapons limit the possibility of retaliation, the unilateral acquisi-

We study the design of randomized controlled experiments when outcomes are significantly affected by experimental subjects' unobserved effort expenditure. While standard randomized controlled trials (RCTs) are internally consistent, the unobservability of effort compromises external validity. We approach trial design as a principal-agent problem and show that natural extensions of RCTs—which we call selective trials—can help improve external validity. In particular, selective trials can disentangle the effects of treatment, effort, and the interaction of treatment and effort. Moreover, they can help identify when treatment effects are affected by erroneous beliefs and inappropriate effort expenditure.

Two opposed interested parties (IPs) compete to influence citizens with heterogeneous priors which receive news items produced by a variety of sources. The IPs fight to capture the coverage conveyed in these items. We characterize the equilibrium level of capture of item as well as the equilibrium level of information transmission. Capture increases the prevalence of the ex ante most informative messages and can explain the empirical distribution of slant at the news‐item level. Opposite capturing efforts do not cancel each other and instead undermine social learning as rational citizens discount informative messages. Citizen skepticism makes efforts to capture the news strategic substitutes. Because of strategic substitution, competition for influence is compatible with horizontal differentiation between successful media. In equilibrium, rational citizens choose to consume messages from aligned sources despite knowledge of the bias in a manner consistent with recent empirical evidence.

We posit that autocrats introduce local elections when their bureaucratic capacity is low. Local elections exploit citizens’ informational advantage in keeping local officials accountable, but they also weaken vertical control. As bureaucratic capacity increases, the autocrat limits the role of elected bodies to regain vertical control. We argue that these insights can explain the introduction of village elections in rural China and the subsequent erosion of village autonomy years later. We construct a novel dataset to document political reforms, policy outcomes, and de facto power for almost four decades. We find that the introduction of elections improves popular policies and weakens unpopular ones. Increases in regional government resources lead to loss of village autonomy, but less so in remote villages. These patterns are consistent with an organizational view of local elections within autocracies.

Ethnic favoritism is seen as antithetical to development. This paper provides credible quantification of the extent of ethnic favoritism using data on road building in Kenyan districts across the 1963–2011 period. Guided by a model, it then examines whether the transition in and out of democracy under the same president constrains or exacerbates ethnic favoritism. Across the post-independence period, we find strong evidence of ethnic favoritism: districts that share the ethnicity of the president receive twice as much expenditure on roads and have five times the length of paved roads built. This favoritism disappears during periods of democracy.