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Diversity and the power of the elites in democratic societies: Evidence from Indonesia

Listed author(s):
  • Bandiera, Oriana
  • Levy, Gilat

This paper analyzes whether political outcomes in local democracies are determined by the preferences of the median -typically poor-agents or whether they reflect the wishes of the wealthy elites. Theory suggests that when politicians belonging to different groups can form coalitions, the wealthy elites’ influence on policy choices is endogenously higher when there is diversity in preferences among the poor. The pattern of public good provision by local governments in Indonesia is consistent with this intuition. Our analysis indeed shows that when individuals have different preferences – here due to different ethnicities – democratic policy outcomes are closer to the preferences of the elites, rather than the preferences of the poor majority.

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File URL: http://www.sciencedirect.com/science/article/pii/S0047272711000533
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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 95 (2011)
Issue (Month): 11 ()
Pages: 1322-1330

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Handle: RePEc:eee:pubeco:v:95:y:2011:i:11:p:1322-1330
DOI: 10.1016/j.jpubeco.2011.04.002
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

References listed on IDEAS
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  1. Alberto Alesina & Eliana La Ferrara, 2004. "Ethnic Diversity and Economic Performance," Development Working Papers 193, Centro Studi Luca d'Agliano, University of Milano.
  2. Casey B. Mulligan & Xavier Sala-i-Martin & Ricard Gil, 2003. "Do Democracies Have Different Public Policies than Nondemocracies?," NBER Working Papers 10040, National Bureau of Economic Research, Inc.
  3. Alberto Alesina & Reza Baqir & William Easterly, 1997. "Public Goods and Ethnic Divisions," NBER Working Papers 6009, National Bureau of Economic Research, Inc.
  4. Benjamin A. Olken & Monica Singhal, 2009. "Informal Taxation," NBER Working Papers 15221, National Bureau of Economic Research, Inc.
  5. Persson, Torsten & Tabellini, Guido, 2006. "Democratic Capital: The Nexus of Political and Economic Change," CEPR Discussion Papers 5654, C.E.P.R. Discussion Papers.
  6. Daron Acemoglu & James A. Robinson, 2006. "Persistence of Power, Elites and Institutions," NBER Working Papers 12108, National Bureau of Economic Research, Inc.
  7. Raquel Fernández & Gilat Levy, 2005. "Diversity and redistribution," LSE Research Online Documents on Economics 544, London School of Economics and Political Science, LSE Library.
  8. Alberto Alesina & Reza Baqir & William Easterly, 1999. "Public Goods and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1243-1284.
  9. Cagla Okten & Una Okonkwo Osili, 2004. "Contributions in heterogeneous communities: Evidence from Indonesia," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(4), pages 603-626, December.
  10. Joan Esteban & Debraj Ray, 2008. "On the Salience of Ethnic Conflict," American Economic Review, American Economic Association, vol. 98(5), pages 2185-2202, December.
  11. Masayuki Kudamatsu, 2012. "Has Democratization Reduced Infant Mortality In Sub-Saharan Africa? Evidence From Micro Data," Journal of the European Economic Association, European Economic Association, vol. 10(6), pages 1294-1317, December.
  12. Dani Rodrik, 1999. "Democracies Pay Higher Wages," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 707-738.
  13. Gilat Levy, 2004. "A model of political parties," LSE Research Online Documents on Economics 540, London School of Economics and Political Science, LSE Library.
  14. Rao, Vijayendra, 2005. "Symbolic public goods and the coordination of collective action : a comparison of local development in India and Indonesia," Policy Research Working Paper Series 3685, The World Bank.
  15. Gilat Levy, 2005. "The Politics of Public Provision of Education," The Quarterly Journal of Economics, Oxford University Press, vol. 120(4), pages 1507-1534.
  16. Paul Collier, 2000. "Ethnicity, Politics and Economic Performance," Economics and Politics, Wiley Blackwell, vol. 12(3), pages 225-245, November.
  17. Adam Przeworski & Fernando Limongi, 1993. "Political Regimes and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 51-69, Summer.
  18. Oriana Bandiera & Gilat Levy, 2010. "Diversity and the Power of the Elites inDemocraticSocieties: A Model and a Test," STICERD - Economic Organisation and Public Policy Discussion Papers Series 018, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  19. Timothy Besley & Masayuki Kudamatsu, 2006. "Health and Democracy," American Economic Review, American Economic Association, vol. 96(2), pages 313-318, May.
  20. Beard, Victoria A., 2007. "Household Contributions to Community Development in Indonesia," World Development, Elsevier, vol. 35(4), pages 607-625, April.
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