Businessman Candidates

In immature democracies, businessmen run for public office to gain direct control over policy, whereas in mature democracies they typically rely on other means of influence. We develop a simple model to show that businessmen run for office only when two conditions hold. First, as in many immature democracies, institutions which make reneging on campaign promises costly must be poorly developed. In such environments, office holders have monopoly power which can be used to extract rents, and businessmen may run to capture those rents. Second, however, the returns to businessmen from policy influence must not be too large, as otherwise the endogenous rents from holding office draw professional politicians into the race, crowding out businessmen candidates. Analysis of data on Russian gubernatorial elections supports these predictions, showing that 1) businessman candidates are less likely in regions with high media freedom and government transparency, institutions which raise the cost of reneging on campaign promises, and 2) businessman candidates are less likely in regions where returns to policy influence (measured by regional resource abundance) are large, but only where media are unfree and government nontransparent.