Free DP Download 08 September 2021 - Electing Educated Leaders during Democratization: Evidence from Indonesia
Paul Pelzl, Steven Poelhekke CEPR Discussion Paper No. 16486 | August 2021
Using manufacturing plant-level census data from Indonesia, a CEPR study by Paul Pelzl and Steven Poelhekke shows how the effect of democratization on manufacturing performance crucially depends on the education level of the newly elected local leaders.
The study shows how in districts that elect a mayor without college education, employment drops by five percent in the first few years after democratization, while employment stays constant under college-educated mayors. The authors also identify mechanisms: manufacturing plants in districts with non-college educated mayors face a much larger increase in local taxes, but also worse provision of local infrastructure and no extra spending on other public goods.
A novel hand-collected dataset on corruption cases further suggests that democratic mayors without a college degree are more corrupt. These estimates are plausibly causal since the year of local democratization varies exogenously across districts, and districts with different mayor education levels exhibit parallel trends in manufacturing prior to democratization.