The Democracy Effect: A Weights-Based Identification Strategy

37 Pages Posted: 8 Apr 2019 Last revised: 16 Apr 2021

See all articles by Pedro Dal Bo

Pedro Dal Bo

Brown University - Department of Economics

Andrew D. Foster

Brown University - Department of Economics; Brown University - Watson Institute for International and Public Affairs

Kenju Kamei

Durham University - Department of Economics and Finance

Date Written: April 2019

Abstract

Dal Bó, Foster and Putterman (2010) show experimentally that the effect of a policy may be greater when it is democratically selected than when it is exogenously imposed. In this paper we propose a new and simpler identification strategy to measure this democracy effect. We derive the distribution of the statistic of the democracy effect, and apply the new strategy to the data from Dal Bó, Foster and Putterman (2010) and data from a new real-effort experiment in which subjects’ payoffs do not depend on the effort of others. The new identification strategy is based on calculating the average behavior under democracy by weighting the behavior of each type of voter by its prevalence in the whole population (and not conditional on the vote outcome). We show that use of these weights eliminates selection effects under certain conditions. Application of this method to the data in Dal Bó, Foster and Putterman (2010) confirms the presence of the democracy effect in that experiment, but no such effect is found for the real-effort experiment.

Suggested Citation

Dal Bo, Pedro and Foster, Andrew D. and Kamei, Kenju, The Democracy Effect: A Weights-Based Identification Strategy (April 2019). NBER Working Paper No. w25724, Available at SSRN: https://ssrn.com/abstract=3368014

Pedro Dal Bo (Contact Author)

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States
401-863-2953 (Phone)
401-863-1970 (Fax)

HOME PAGE: http://www.econ.brown.edu/fac/Pedro_Dal_Bo/

Andrew D. Foster

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States
401-863-2537 (Phone)

Brown University - Watson Institute for International and Public Affairs ( email )

111 Thayer Street
Box 1970
Providence, RI 02912-1970
United States

Kenju Kamei

Durham University - Department of Economics and Finance ( email )

Durham, DH1 3HY
United Kingdom

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