Political dynasties remain ubiquitous in democratic countries even though many societies democratised to end hereditary rule. This article studies how dynastic politics affects economic development in India. It finds that the incentive to establish a dynasty encourages politicians to exert more effort and perform better in office. However, dynastic descendants perform worse than regular politicians because they inherit voters loyal to their family and face weaker performance incentives. This results in a ‘reversal of fortune’ development pattern.

Aquinos, Bhuttos, Trudeaus, Yudhoyonos, Gandhis, Lees, Fujimoris: political dynasties remain ubiquitous in democratic countries. Though many societies democratised to end hereditary rule, nearly 50% of democratic countries have elected multiple heads of State from a single family. Politics is significantly more dynastic than other occupations in democratic societies. Individuals are, on average, five times more likely to enter their father’s occupation. But having a politician father raises one's odds of entering politics by 110 times, more than double the dynastic bias of other elite occupations like medicine and law. Despite their prevalence and influence, we know little about the economic effects of political dynasties.

Effects of dynastic politics are theoretically ambiguous

Economic theory makes ambiguous predictions about how dynastic politics affects development. On the one hand, bequest motives might lengthen politicians' time horizons and encourage them to make long-term investments. These founder effects could be good for economic development. However, if some political capital is heritable (such as a prominent name or a powerful network), dynastic politics may render elections less effective at selecting good leaders and disciplining them in office. These descendant effects are likely bad for development. The overall impact of dynastic politics is ambiguous, because it is the net result of founder- and descendant effects.

India: Our setting to study political dynasties

In recent research (George and Ponattu 2018), I along with my co-author, study the economic impacts of dynastic politics in India, where legislators play a significant role in local economic development, and the merits of dynasties are publicly contested. We identify family ties between politicians by compiling detailed biographical information on all members of India's national Parliament (MPs) since 1862, when Indians were first allowed to serve in the British-era legislative assemblies. We document that political dynasties are widespread in India: 10% of MPs are children of former MPs, which is nearly 2,500 times higher than random chance would predict, and over 35% of villages have been represented in the Parliament by at least one dynastic politician.

We employ three different empirical strategies to identify (i) descendant effects; (ii) founder effects; and (iii) the overall impact of a dynastic political environment on economic development.

Dynastic descendants are bad for development

First, we identify descendant effects using a close elections regression discontinuity (RD) design. This empirical strategy focuses on close races between dynastic descendants (that is, direct relatives of former officeholders) and non-dynasts, and compare places where a descendant narrowly won to those where a descendant narrowly lost. In these elections, descendants, and non-dynasts have similar demographic and political characteristics, and win in similar places and at similar rates. Nevertheless, we find that villages are poorer and have fewer public goods after being represented by a descendant for an electoral term. Households are less likely to live in a brick house and to own basic amenities like a fridge or mobile phone. An additional electoral term of being represented by a descendant lowers a village's wealth rank by 12 percentage points.

Reason descendants underperform: Moral hazard

Moral hazard is one reason that descendants underperform. Descendants face moral hazard because they inherit voters loyal to their father, dampening incentives to exert effort and perform well in office. A significant fraction of political capital appears to be heritable: the parent-child vote share correlation¹ is 0.23, about one-third as large as the correlation between a politician's own vote shares in different elections. We isolate the effects of moral hazard on performance using constituency boundary changes (‘redistricting’), which affect the overlap between a descendant's electoral district and her predecessor's former electoral district. Redistricting affects the number of votes a descendant inherits each election. The same descendant earns 1.2 percentage-points more votes and completes 2.8 percentage-points fewer projects when redistricting increases the spatial overlap between her constituency and her father's former constituency by 10%. Overall, moral hazard explains about 40% of the performance gap between descendants and non-dynasts.

Figure 1. Redistricting variation used to test moral hazard

Bequest motives are good for development

Second, we show that bequest motives encourage politicians to perform better in office. To test whether bequest motives affect in-office behaviour, we compare the behavior of politicians with a son against that of politicians with only daughters. Women face significant barriers to enter politics in India. As a result, conditional on the number of children, politicians who have a son are twice as likely to found a dynasty (relative to politicians with only daughters), even though they appear similar on most demographic and political characteristics. Politicians with a son exert more effort while in office: they are two percentage-points more likely to complete local development projects (even conditional on the same implementing agency), six percentage-points more likely to hold the stipulated quarterly meeting with local bureaucrats to take stock of constituency development work, and are assessed by voters to perform better in office.

Figure 2. Performance of politicians with a son vs. those with only daughters

Overall effect of dynastic politics: A 'reversal of fortune’ development pattern

Third, we estimate the overall effect of a dynastic political environment, which is the net result of founder- and descendant effects. Our empirical strategy attempts to simulate the ideal experiment of going from a world where dynasties are not possible to a world where they are possible. Because politicians with a son are more likely to found dynasties, and sons typically run in their parents' constituency, places where past incumbents had a son are more exposed to both founders and descendants. Using this variation, we find that dynastic rule has overall negative economic effects and results in a distinct ‘reversal of fortune’ development pattern. Exposure to MPs with a son initially has positive effects on development, when the first generation of politicians is in power and are motivated by bequest concerns. But these places – with greater early exposure to MPs with a son – fall so far behind once the second generation of politicians enter politics and inherit their parents' constituencies, that by the end of our sample period, they are poorer and have fewer public goods. These time-varying patterns are consistent with the lifecycle of a dynasty, but inconsistent with the most obvious confounding explanations (for example, son preference). Moreover, both the initial positive effect and the subsequent negative effect are absent in strongholds of parties with norms against dynasties, like the Communist parties. Overall, a standard deviation increase in exposure to dynastic rule lowers a village's wealth percentile rank by 7 percentile points.

Figure 3. 'Reversal of fortune’ development pattern resulting from dynastic rule

A simple theory of dynastic politics

These empirical facts are consistent with a simple theory of dynastic politics, whose key element is that both human capital (that is, governing ability) and political capital (that is, name recognition, network) are heritable. Heritable human capital creates signalling incentives for parents to perform well in office and signal that their descendant is competent. But inherited political capital allows descendants to persist in power even when they underperform.

Policy implications

Our results imply that heritable political capital weakens the ability of elections to select talented leaders and discipline them while in office. Our findings also suggest that a significant portion of inherited political advantages appear to be local. Policy tools to limit the ability of children to run in their parents’ former constituency – such as those currently being considered by the Philippines Senate – may help discipline dynasties and perhaps even harness dynastic incentives for good.

Notes:

1. Correlation measures strength of the relationship between two variables.

Further Reading

• George, SE and D Ponattu (2018), ‘Like Father, Like Son? How Political Dynasties Affect Economic Development’, Job market paper, 17 November 2018.