DP5985 Businessman Candidates

Author(s): Scott Gehlbach , Konstantin Sonin , Ekaterina Zhuravskaya

Publication Date: December 2006

Keyword(s): political connections , businessman candidates , immature democracy , media freedom , government transparency , strength of political parties

JEL(s): D72

Programme Areas: Development Economics , Public Policy

Link to this Page: www.cepr.org/pubs/dps/DP5985.asp

In immature democracies, businessmen run for public office to gain direct control over policy; in mature democracies they typically rely on other means of influence. We develop a simple model to show that businessmen run for office only when two conditions hold. First, as in many immature democracies, institutions that make reneging on campaign promises costly must be poorly developed. In such environments, office holders have monopoly power that can be used to extract rents, and businessmen run to capture those rents. Second, the returns to businessmen from policy influence must not be too large, as otherwise high rents from holding office draw professional politicians into the race, crowding out businessmen candidates. Analysis of data on Russian gubernatorial elections supports these predictions. Businessman candidates are less likely 1) in regions with high media freedom and government transparency, institutions that raise the cost of reneging on campaign promises, and 2) in regions where returns to policy influence (measured by regional resource abundance) are large, but only where media are unfree and government nontransparent.