Georgy Egorov

Why Resource-Poor Dictators Allow Freer Media: A Theory and Evidence from Panel Data

Every dictator dislikes free media. Yet, many nondemocratic countries have partially free or almost free media. In this article, we develop a theory of media freedom in dictatorships and provide systematic statistical evidence in support of this theory. In our model, free media allow a dictator to provide incentives to bureaucrats and therefore to improve the quality of government. The importance of this benefit varies with the natural resource endowment. In resource-rich countries, bureaucratic incentives are less important for the dictator; hence, media freedom is less likely to emerge. Using panel data, we show that controlling for country fixed effects, media are less free in oil-rich economies, with the effect especially pronounced in nondemocratic regimes. These results are robust to model specification and the inclusion of various controls, including the level of economic development, democracy, country size, size of government, and others.

Delegation and nonmonetary incentives

In many contracting settings, actions costly to one party but with no direct benefits to the other (money-burning) may be part of the explicit or implicit contract. A leading example is bureaucratic procedures in an employer–employee relationship. We study a model of delegation with an informed agent, where the principal may impose money-burning on the agent as a function of the agents choice of action, and show that money-burning may be part of the optimal contract. This result holds even if action-contingent monetary transfers are possible, as long as transfers from the principal to the agent are bounded from below (as in limited liability or minimal wage requirements). In fact, the optimal contract can involve a combination of both efficient monetary incentives and inefficient nonmonetary incentives through money burning. Our model delivers some results novel to the delegation literature. First, money-burning is more likely if the principal is more “sensitive” to the choice of action than the agent. This is consistent with the perception that there is more bureaucratization in large organizations. Second, money-burning is more likely if the agents limited liability constraint is tighter relative to his participation constraint. This implies that a higher minimum wage distorts employment contracts towards using socially wasteful nonmonetary incentives, leading to a Pareto inferior outcome as the agent is still held down to his reservation value through increased money burning.

Incumbency Advantage in Non-Democracies

In elections that take place in a less-than-perfect democracy, incumbency advantages are different from those in mature democracies. The incumbent can prevent credible challengers from running, organize vote fraud, or even physically eliminate his main opponents. At the same time, formally winning the election does not guarantee staying in power. We present a unified model of elections and mass protests where the purpose of competitive elections is to reveal information about the relative popularity of the incumbent and the opposition. Citizens are heterogenous in their attitudes toward the dictator, and these individual preferences serve as private signals about the aggregate distribution of preferences; this ensures a unique equilibrium for any information the incumbent may reveal. We show that the most competent or popular dictators run in competitive elections, mediocre ones prevent credible opponents from running or cancel elections, and the least competent ones use outright repressions. A strong opposition makes competitive elections more likely but also increases the probability of repression. A totalitarian regime, where repression is cheaper, will have more repression, but even in the absence of repression, competitive elections will be rarer. A crueler, say, military, regime, where protesting is costly, makes repression less likely and, surprisingly, competitive elections more likely.

Political Model of Social Evolution

Almost all democratic societies evolved socially and politically out of authoritarian and nondemocratic regimes. These changes not only altered the allocation of economic resources in society but also the structure of political power. In this paper, we develop a framework for studying the dynamics of political and social change. The society consists of agents that care about current and future social arrangements and economic allocations; allocation of political power determines who has the capacity to implement changes in economic allocations and future allocations of power. The set of available social rules and allocations at any point in time is stochastic. We show that political and social change may happen without any stochastic shocks or as a result of a shock destabilizing an otherwise stable social arrangement. Crucially, the process of social change is contingent (and history-dependent): the timing and sequence of stochastic events determine the long-run equilibrium social arrangements. For example, the extent of democratization may depend on how early uncertainty about the set of feasible reforms in the future is resolved.

Equilibrium Refinement in Dynamic Voting Games

We propose two related equilibrium refinements for voting and agenda-setting games. Sequentially Weakly Undominated Equilibrium (SWUE) and Markov Trembling Hand Perfect Equilibrium (MTHPE), and show how these equilibrium concepts eliminate non-intuitive equilibria that arise naturally in dynamic voting games and games in which random or deterministic sequences of agenda-setters make offers to several players. We establish existence of these equilibria in finite and infinite (for MTHPE) games, provide a characterization of the structure of equilibria, and clarify the relationship between the two concepts. Finally, we show how these concepts can be applied in a dynamic model of endogenous club formation.

Electoral rules and political selection : theory and evidence from a field experiment in Afghanistan

United States. Army Research Office. Multidisciplinary University Research Initiative (Award W911NF-12-1-0509)

Endogenous Property Rights

It is often argued that additional checks and balances provide economic agents with better protection from expropriation of their wealth or productive capital. We demonstrate that in a dynamic political economy model this intuition may be flawed. Surprisingly, increasing the number of veto players or the majority requirement for redistribution may reduce property right protection on the equilibrium path. The reason is the existence of two distinct mechanisms of property rights protection. One are formal constraints that allow individuals or groups to block any redistribution which is not in their favor. The other occurs in equilibrium where agents without such powers protect each other from redistribution. Players without formal blocking power anticipate that the expropriation of other similar players will ultimately hurt them and thus combine their influence to prevent redistributions. Yet, such incentives can be undermined by adding formal constraints. The flip-side of this effect is that individual investment efforts might require coordination. The model also predicts that the distribution of wealth in societies with weaker formal institutions (smaller supermajority requirements) among players without veto power will tend to be more homogenous.

Private Politics and Public Regulation

We develop a dynamic game to explore the interaction between regulation and private policies, such as self-regulation by firms and activism. Without a public regulator, the possibility of self-regulation is bad for the firm, but good for activists who are willing to maintain a costly boycott to raise the likelihood of self-regulation. Results are reversed when the regulator is present: the firm then self-regulates to preempt public regulation, while activists start and continue boycotts to raise the likelihood of such regulation. Our analytical results describe when a boycott is likely, and when it may be expected to be short and/or successful. The model generates a rich set of testable comparative statics.

Political Economy of Redistribution

It is often argued that additional constraints on redistribution such as granting veto power to more players in society better protects property from expropriation. We use a model of multilateral bargaining to demonstrate that this intuition may be flawed. Increasing the number of veto players or raising the supermajority requirement for redistribution may reduce protection on the equilibrium path. The reason is the existence of two distinct mechanisms of property protection. One is formal constraints that allow individuals or groups to block any redistribution that is not in their favor. The other occurs in equilibrium where players without such powers protect each other from redistribution. Players without formal veto power anticipate that the expropriation of other similar players will ultimately hurt them and thus combine their influence to prevent redistributions. In a stable allocation, the society exhibits a “class” structure with class members having equal wealth and strategically protecting each other from redistribution.