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Political Competition and State Capacity: Evidence from a Land Allocation Program in Mexico

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  • Leopoldo Fergusson
  • Horacio Larreguy
  • Juan Felipe Riaño

Abstract

We develop a model of the politics of state capacity building undertaken by incumbent parties that have a comparative advantage in clientelism rather than in public goods provision. The model predicts that, when challenged by opponents, clientelistic incumbents have the incentive to prevent investments in state capacity. We provide empirical support for the model’s implications by studying policy decisions by the Institutional Revolutionary Party that affected local state capacity across Mexican municipalities and over time. Our difference-in-differences and instrumental variable identification strategies exploit a national shock that threatened the Mexican government’s hegemony in the early 1960s.

Suggested Citation

  • Leopoldo Fergusson & Horacio Larreguy & Juan Felipe Riaño, 2022. "Political Competition and State Capacity: Evidence from a Land Allocation Program in Mexico," The Economic Journal, Royal Economic Society, vol. 132(648), pages 2815-2834.
  • Handle: RePEc:oup:econjl:v:132:y:2022:i:648:p:2815-2834.
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    Cited by:

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    3. Valencia Caicedo, Felipe & Eslava Saenz, Francisco, 2023. "Origins of Latin American Inequality," CEPR Discussion Papers 18263, C.E.P.R. Discussion Papers.
    4. Leopoldo Fergusson, 2019. "Who wants violence? The political economy of conflict and state building in Colombia," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, vol. 38(78), pages 671-700, November.
    5. Ana L. De La O, 2021. "How clientelism undermines state capacity: Evidence from Mexican municipalities," WIDER Working Paper Series wp-2021-169, World Institute for Development Economic Research (UNU-WIDER).
    6. Elizalde, Aldo, 2020. "On the economic effects of Indigenous institutions: Evidence from Mexico," Journal of Development Economics, Elsevier, vol. 147(C).
    7. Canen, Nathan & Ch, Rafael & Wantchekon, Leonard, 2023. "Political uncertainty and the forms of state capture," Journal of Development Economics, Elsevier, vol. 160(C).
    8. Artem Kochnev, 2021. "Marching to Good Laws: The Impact of War, Politics, and International Credit on Reforms in Ukraine," wiiw Working Papers 192, The Vienna Institute for International Economic Studies, wiiw.

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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