Quoc-Anh Do

Inequality, Redistribution, and Population

We document a negative relationship between population size and inequality in the cross-country data. We propose an explanation built on the existence of a size effect in the political economy of redistribution, particularly in the presence of different channels of popular request for redistribution, e.g. “institutional” channels and “revolutions”. Based on the assumption that the threat of revolution is directly related to the number of people that may attempt to revolt, the theory predicts that the stylized fact initially uncovered by the paper can be refined as follows: there is a negative relationship between population size, and its geographical concentration, and post-tax inequality in non-democracies. We subject these predictions to extensive empirical scrutiny in a cross-country context, and the data robustly confirm these patterns of inequality, population, and the interaction with democracy.

How Much is a Friend Worth? Directed Altruism and Enforced Reciprocity in Social Networks

We conduct field experiments in a large real-world social network to examine why decision-makers treat their friends more generously than strangers. Subjects are asked to divide a surplus between themselves and named partners at varying social distances, but only one of these decisions is implemented. We decompose altruistic preferences into baseline altruism towards strangers, and directed altruism towards friends. In order to separate the motives that are altruistic from the ones that anticipate a future interaction or repayment, we implement an anonymous treatment in which neither player is told at the end of the experiment which decision was selected for payment, and a non-anonymous treatment where both players are told the outcome. Moreover, in order to distinguish between different future interaction channels—including signaling one’s propensity to be generous and enforced reciprocity, where the decision-maker grants the partner a favor because she expects it to be repaid in the future—the experiments include games where transfers both increase and decrease social surplus. We find that decision-makers vary widely in their baseline altruism, but pass at least 50 percent more surplus to friends as opposed to strangers when decision-making is anonymous. Under non-anonymity, transfers to friends increase by an extra 24 percent relative to strangers, but only in games where transfers increase social surplus. This effect increases with the density of the social network structure between both players. Our findings are well explained by enforced reciprocity, but not by signaling or preference-based reciprocity. We also find that partners’ expectations are well attuned to directed altruism, but that they completely ignore the decision-makers’ baseline altruism. Partners with higher baseline altruism have friends with higher baseline altruism and, therefore, are treated better by their friends.We conduct online field experiments in large real-world social networks in order to decompose prosocial giving into three components: (1) baseline altruism toward randomly selected strangers, (2) directed altruism that favors friends over random strangers, and (3) giving motivated by the prospect of future interaction. Directed altruism increases giving to friends by 52 percent relative to random strangers, while future interaction effects increase giving by an additional 24 percent when giving is socially efficient. This finding suggests that future interaction affects giving through a repeated game mechanism where agents can be rewarded for granting efficiency enhancing favors. We also find that subjects with higher baseline altruism have friends with higher baseline altruism.

Out of Sight, Out of Mind: The Value of Political Connections in Social Networks

Using networks of university classmates among corporate directors and U.S. congressmen and the regression discontinuity design of close elections from 2000 to 2008, we identify a significant but widely varying impact of political connections on firm value. Surrounding the election day, connections to powerful senators increase firm value by 8.59%, while connections to elected congressmen decrease firm value by 2.65% on average. Political connections are especially valuable at the state level, in highly regulated and corrupted states, and in small and financially dependent firms. Following elections, firms connected to the winner decrease state activities; meanwhile, their directors tend to serve shorter tenure.

A Centered Index of Spatial Concentration: Axiomatic Approach with an Application to Population and Capital Cities

We construct an axiomatic index of spatial concentration around a center or capital point of interest, a concept with wide applicability from urban economics, economic geography and trade, to political economy and industrial organization. We propose basic axioms (decomposability and monotonicity) and refinement axioms (order preservation, convexity, and local monotonicity) for how the index should respond to changes in the underlying distribution. We obtain a unique class of functions satisfying all these properties, defined over any n-dimensional Euclidian space: the sum of a decreasing, isoelastic function of individual distances to the capital point of interest, with specific boundaries for the elasticity coefficient that depend on n. We apply our index to measure the concentration of population around capital cities across countries and US states, and also in US metropolitan areas. We show its advantages over alternative measures, and explore its correlations with many economic and political variables of interest.

One Mandarin Benefits the Whole Clan: Hometown Infrastructure and Nepotism in an Autocracy

This paper studies nepotism by government officials in an authoritarian regime. We collect a unique dataset of political promotions of officials in Vietnam and estimate their impact on public infrastructure in their hometowns. We find strong positive effects on several outcomes, some with lags, including roads to villages, marketplaces, clean water access, preschools, irrigation, and local radio broadcasters, as well as the hometown’s propensity to benefit from the State’s “poor commune support program”. Nepotism is not limited to only top-level officials, pervasive even among those without direct authority over hometown budgets, stronger when the hometown chairperson’s and promoted official’s ages are closer, and where provincial leadership has more discretionary power in shaping policies, suggesting that nepotism works through informal channels based on specific political power and environment. Contrary to pork barrel politics in democratic parliaments, members of the Vietnamese legislative body have little influence on infrastructure investments for their hometowns. Given the top-down nature of political promotions, officials arguably do not help their tiny communes in exchange for political support. Consistent with that, officials favor only their home commune and ignore their home district, which could offer larger political support. These findings suggest that nepotism is motivated by officials’ social preferences directed towards their related circles, and signals an additional form of corruption that may prevail in developing countries with low transparency.

Sugar and Spice and Everything Nice: What Are Independent Directors Made Of?

We empirically analyze how outside directors and firms choose each other in a sample of 40,585 unique directors associated with 5,246 unique U.S. listed firm. We first provide stylized facts on outside directors and the successful ones. We find that gender, qualifications (MBA), work experience (especially S&P500 firm experience and CEO experience), social network size, experience on board committees, all impact the likelihood of becoming a successful director. Directors of large, complex, volatile and qualitatively reputable firms and of firms with higher levels of institutional ownership are also more likely to become successful directors. Being a member of a more independent board or obtaining the first directorship during a recession act against obtaining a second directorship. Second, we find that firms search for candidates for directorship from older, larger, more complex, more transparent, better governed, and well-performing companies. Third, we document and quantify the impact of five most important factors that determine the two-sided firm-director matching process, namely firm size, firm risk (return and operating performance volatility), stock performance, firm age, and institutional holdings. Overall, our evidence is informative for the workings of the labor market for outside directors.

Directors as Connectors: The Impact of the External Networks of Directors on Firms

The external networks of directors significantly impact firm value and decisions. Surrounding close gubernatorial elections, local firms with directors connected to winners increase value by 4.1% over firms connected to losers. Director network’s value increases with network strength and activities, and is not due to network homophily. Connected firms are more likely to receive state subsidies, loans, and tax credits. They obtain better access to bank loans, borrow more, pay lower interest, invest and employ more, and enjoy better long-term performance. Network benefits are concentrated on connected firms, possibly through quid pro quo deals, and unlikely spread to industry competitors.

Political Connections and Firm Value: Evidence from Close Gubernatorial Elections

Using the regression discontinuity design of close gubernatorial elections in the U.S., we identify a significant and positive impact of the social networks of corporate directors and politicians on firm value. Firms connected to elected governors increase their value by 3.89%. Political connections are more valuable for firms connected to winning challengers, for smaller and financially dependent firms, in more corrupt states, in states of connected firms’ headquarters and operations, and in closer, smaller, and active networks. Post-election, firms connected to the winner receive significantly more state procurement contracts and invest more than do firms connected to the loser.