The Business Cycle Dynamics of Clientelism

• In Event: Money and Special Interest Influence in Politics

Abstract

We consider a dynamic model of vote-buying in which local brokers must invest in political networks over the life of a business cycle, without knowing if the clientelistic party will commit to using said networks and hence providing them with rents at the time of the election. We show that economies characterized by long boom periods will actually have greater levels of clientelism, as this relaxes the commitment problem for the party in power. These economies with long periods of economic persistence may appear to see shifts to general interest policies for a time (e.g., the Peronists in Argentina), but will also be likely to revert to clientelism when the economy is stabilized. The fixed costs for rebuilding fallow networks will have a non-monotonic effect on clientelism, as low fixed costs create a commitment problem for brokers, but sufficiently high fixed costs guarantee that clientelism will eventually be broken for good.

Author

• Benjamin Ogden, Texas A&M University