Wednesday, May 15, 2013

Isolation And Governance

I have to admit I read these twin papers with a smirk on my face (abstracts):

Isolated Capital Cities and Misgovernance: Theory and Evidence
Filipe R. Campante, Quoc-Anh Do, Bernardo V. Guimaraes

Motivated by a novel stylized fact – countries with isolated capital cities display worse quality of governance – we provide a framework of endogenous institutional choice based on the idea that elites are constrained by the threat of rebellion, and that this threat is rendered less effective by distance from the seat of political power. In established democracies, the threat of insurgencies is not a binding constraint, and the model predicts no correlation between isolated capitals and misgovernance. In contrast, a correlation emerges in equilibrium in the case of autocracies. Causality runs both ways: broader power sharing (associated with better governance) means that any rents have to be shared more broadly, hence the elite has less of an incentive to protect its position by isolating the capital city; conversely, a more isolated capital city allows the elite to appropriate a larger share of output, so the costs of better governance for the elite, in terms of rents that would have to be shared, are larger. We show evidence that this pattern holds true robustly in the data. We also show that isolated capitals are associated with less power sharing, a larger income premium enjoyed by capital city inhabitants, and lower levels of military spending by ruling elites, as predicted by the theory.

Isolated Capital Cities, Accountability and Corruption: Evidence from US States
Filipe R. Campante, Quoc-Anh Do

We show that isolated capital cities are robustly associated with greater levels of corruption across US states, in line with the view that this isolation reduces accountability, and in contrast with the alternative hypothesis that it might forestall political capture. We then provide direct evidence that the spatial distribution of population relative to the capital affects different accountability mechanisms over state politics: newspaper coverage, voter knowledge and information, and turnout. We also find evidence against the capture hypothesis: isolated capitals are associated with more money in state-level campaigns. Finally, we show that isolation is linked with worse public good provision.

I don’t need to spell it out, do I?

Technical Notes

  1. Campante, Filipe R. and Quoc-Anh Do & Bernardo V. Guimaraes, "Isolated Capital Cities and Misgovernance: Theory and Evidence", NBER Working Paper No. 19028, May 2013

  2. Campante, Filipe R. and Quoc-Anh Do, "Isolated Capital Cities, Accountability and Corruption: Evidence from US States", NBER Working Paper No. 19027, May 2013


  1. Jasper BloodstoneMay 18, 2013 at 12:33 PM

    Do spell it out, Hisham?

    It would be interesting to contrast KL (oops, that should be Putrajaya) against other well-known capital cities. Off the top of my head, I can think of London, Paris, Washington DC, Tokyo and Ottawa in the "developed world".

    How do the "markers" play out in this regard?

    Or in real life, which is divorced from the esoterically abstract hypotheses of academic treatises?

    1. Jasper,

      I don't see the point - the hypothesis is pretty unambiguous.

      BTW, out of that list you mention, one is an "artificial" capital city (DC), while two (Tokyo and Ottawa) were selected on the basis of being away from existing population and economic centres. Makes one wonder about the interaction between the initial impetus to isolate politics and economics, and time.