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

We develop a model of the politics of state strengthening undertaken by incumbent parties that have a comparative advantage in clientelism rather than in public good provision. The model suggests that, when politically challenged by opponents, clientelistic incumbents may oppose investing in state capacity. We provide empirical support for the model’s implications using policy decisions that reflect local state capacity choices, and a difference-in-differences identification strategy that exploits a national shock that threatened the Mexican Institutional Revolutionary Party’s hegemony in the early 1960s with varying intensity across the various Mexican municipalities.