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The Political Value of Land: Democratization and Land Prices in Chile

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  • Baland, Jean-Marie
  • Robinson, James A

Abstract

Though models of political economy suggest that changes in political institutions, such as democratization, should have large effects on policies and economic outcomes, the empirical literature finds ambiguous results. It is important, however, to ‘unbundle’ democratic reforms into more specific changes, for instance the introduction of secrecy of balloting, and be more specific about the mechanisms linking these to economic outcomes. To this end we develop a simple model of the economic consequences of the absence of a secret ballot. While providing workers with employment, landlords can also impose some degree of political control. When voting is not secret, landlords can dictate who their workers should vote for. As votes are used by the landlords to accumulate political rents, vote control increases the demand for labor and for land. The introduction of secret ballot should lead to a fall in the price of land in those areas where patron-client relationships and vote control were the strongest. We test the predictions of the model by examining in detail the evolution of land prices in Chile around May 31st. 1958, for which we collected original data. A characteristic of rural Chile at this time was the inquilinaje system, by which a worker, the inquilino, entered into a long term, often hereditary, employment relationship with a landlord, and lived on his landlord’s estate. We show that the introduction of the secret ballot in 1958 had implications for land prices which are perfectly consistent with the predictions of our model. Political rents represented 25% of the value of the land in Chile prior to 1958.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8296.

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Date of creation: Mar 2011
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Handle: RePEc:cpr:ceprdp:8296

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Keywords: elections; land prices; political institutions;

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  1. Peter H. Lindert, 2003. "Voice and Growth: Was Churchill Right?," NBER Working Papers 9749, National Bureau of Economic Research, Inc.
  2. Daron Acemoglu & James A. Robinson & Rafael Santos, 2009. "The Monopoly of Violence: Evidence from Colombia," NBER Working Papers 15578, National Bureau of Economic Research, Inc.
  3. Casey B. Mulligan & Ricard Gil & Xavier Sala-i-Martin, 2004. "Do Democracies Have Different Public Policies than Nondemocracies?," Journal of Economic Perspectives, American Economic Association, vol. 18(1), pages 51-74, Winter.
  4. Timothy Besley & Torsten Persson & Daniel.M Sturm, 2005. "Political competition and economic performance: theory and evidence from the United States," LSE Research Online Documents on Economics 3770, London School of Economics and Political Science, LSE Library.
  5. Rodrik, Dani, 1998. "Democracies Pay Higher Wages," CEPR Discussion Papers 1776, C.E.P.R. Discussion Papers.
  6. Torsten Persson & Guido Tabellini, 2006. "Democracy and Development: The Devil in the Details," Levine's Bibliography 122247000000001139, UCLA Department of Economics.
  7. Jean-Marie Baland & James A. Robinson, 2008. "Land and Power: Theory and Evidence from Chile," American Economic Review, American Economic Association, vol. 98(5), pages 1737-65, December.
  8. Bruhn, Miriam & Gallego, Francisco & Onorato, Massimiliano, 2010. "Legislative malapportionment and institutional persistence," Policy Research Working Paper Series 5467, The World Bank.
  9. Dekel, Eddie & Jackson, Matthew O. & Wolinsky, Asher, 2009. "Vote Buying: Legislatures and Lobbying," International Quarterly Journal of Political Science, now publishers, vol. 4(2), pages 103-128, July.
  10. Timothy Besley & Masayuki Kudamatsu, 2006. "Health and Democracy," American Economic Review, American Economic Association, vol. 96(2), pages 313-318, May.
  11. Sadoulet, Elisabeth, 1992. "Labor-Service Tenancy Contracts in a Latin American Context," American Economic Review, American Economic Association, vol. 82(4), pages 1031-42, September.
  12. Eddie Dekel & Matthew O. Jackson & Asher Wolinsky, 2008. "Vote Buying: General Elections," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 351-380, 04.
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