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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.

Suggested Citation

  • Baland, Jean-Marie & Robinson, James A, 2011. "The Political Value of Land: Democratization and Land Prices in Chile," CEPR Discussion Papers 8296, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8296
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    References listed on IDEAS

    as
    1. Miriam Bruhn & Francisco Gallego & Massimiliano Onorato, 2010. "Legislative Malapportionment and institutional persistence," Documentos de Trabajo 381, Instituto de Economia. Pontificia Universidad Católica de Chile..
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    More about this item

    Keywords

    elections; land prices; political institutions;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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