4 Thoughts for the Week

GDP Report

Surprisingly strong at 4.3% yoy…or may be not. Iwas expecting a pickup as we had the minimum wage revision, civil service pay revision, cut in the OPR and cut in the EPF contribution rate. The end result was a 6% (qoq SAAR), which is the best quarterly growth rate since 4Q2014. I haven’t delved into the details yet (the bond market tantrum is occupying my working hour attention at the moment), but apparently there was a pretty decent growth contribution from external trade as well.

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

A Question Of Sampling

I’m not an expert in sample design, but I think I’m qualified to comment on this (excerpt):

Opposition manipulated Umcedel study, claims prof

An academician has accused the opposition of manipulating the Universiti Malaya's Centre for Democracy and Elections' (Umcedel) finding that voters see opposition leader Anwar Ibrahim as more prime ministerial than incumbent Mohd Najib Abdul Razak.

Prof Zainal Kling (right), the Tun Abdul Ghafar Baba fellow at the Universiti Pendidikan Sultan Idris, said this in a national news agency Bernama report yesterday, rebutting the study's conclusion a day after it was announced to the press and academia...

Political Manifestos And Government Waste

Here’s a thought:

Let’s imagine, just for the sake of argument, that you’re a voter in an election campaign – just hypothetically speaking of course.

One party issues a manifesto. It has a lot of bright ideas which you like, but there are some parts which aren’t very appealing to you, and you don’t know how much of the manifesto proposals are going to be implemented. You’d rather not vote for a party that puts forward policies which you don’t agree with.

Then the next party also issues its manifesto, which also has many ideas you like and are in fact similar to the first party’s. Unfortunately, there are a few proposals which you don’t like very much either, but these are quite different from the first. Nor are you sure that all these promises will be fulfilled.

The Economic Competence Of Politicians

Is it advantageous to have leaders and policymakers who are technically competent? As in having formal education in their area of responsibility? Would you expect a doctor to be Minister of Health and a public finance graduate in charge of the Treasury?

You’d think that this is a pretty dumb question – of course they should be. The funny thing is however is that most are not, and voters are quite happy to put them there.

Surveys And Opinions: Has No One Ever Heard Of Selection Bias?

I feel like banging my head against the wall (excerpt):

Study shows Barisan expected to win GE13

KUALA LUMPUR: Barisan Nasional is expected to win the 13th general election (GE13) which will be held this year, according to a study.

Titled “Study on Feedback of Undergraduate Voters”, it covered 3,000 respondents from Universiti Malaya (UM), Universiti Kebangsaan Malaysia (UKM) and Universiti Putra Malaysia (UPM).

The respondents involved undergraduates aged 21 and above from the Malay, Chinese and Indian communities, some of whom would be voting for the first time.