Climate Shocks, Democratization and (a Culture of) Cooperation.

Abstract

To clarify the determinants and impact of a ``culture of cooperation" in developing countries, we analyze climatic and institutional data on 24 most agricultural countries observed over the 1981-2018 period through the lens of the time inconsistency theory of state-building. According to the latter, adverse climate shocks push an elite unable to commit to future transfers to enact more inclusive political institutions and a non-elite, endowed with complementary skills, to embrace strong norms of cooperation. While political reforms convince the non-elite that a sufficient part of the returns on joint investments will be shared via public good provision, cultural accumulation allows the non-elite's credible commitment to cooperation despite its limited return. Consistent with these predictions, the coeval severity of droughts exerts a negative direct impact on agricultural output due to deteriorated farming conditions, whereas the coeval and historical severity of droughts have a positive indirect effect on agricultural output due to a more intense horizontal, vertical and oblique transmission of norms of trust and respect. Given these results, policymakers should design environmental policies considering the interplay among climate change, democratization and culture.

Keywords: climate change; time inconsistency; inclusive political institutions; culture of cooperation; state-building.

JEL Classification: H10; O13; P00; Z10.