Democracy, Dictatorship and Protection of Property Rights Seminar at the Department of Political Science, UiO 3/ Carl Henrik Knutsen

Research question  Does political regime type affect the protection of private property rights in a country Democracy – Dictatorship continuum Differences between different types of dictatorships

Structure paper  Intro  Theoretical arguments Two arguments and two related specifications/discussion of assumptions Earlier empirical studies  The endogeneity problem and a solution (discussion of instrument)  Empirical analysis Democracy-dictatorship (mainly G2SLS-RE and 2SLS- FE) Different types of dictatorship (OLS with PCSE, RE, FE)  Conclusion

Theoretical arguments  The relatively poor majority gains political power under democracy and will enforce extensive redistribution of property  Democracy has negative effect on PR Crucial assumption: Right-wing dictatorship as counterfactual  Unchecked political elites will engage in property grabbing  Democracy has positive effect on PR (political accountability, horisontal checks on executive power etc.) Crucial assumption: Not in self-interest of political leaders to refrain from property grabbing if unchecked  Discussion of assumptions and empirical implications regarding the effects of different types of dictatorships  PR. The roles of political base and time horizon.

The endogeneity problem  Earlier studies have indicated a positive effect from democracy on property rights protection (Leblang, 1996; Boix, 2003; Clague et al., 2003), with some nuances (young democracies, taxation)  But: PR  Democracy. Must take endogeneity into account when estimating effect from democracy on PR. The libertarian argument. Property and freedom Property rights, economic development and modernization theory

Solution to endogeneity problem  Lag independent variables with two years  2SLS: Isolate exogenous variation in regime type to find better estimates of causal effect. Huntington’s waves Transition within (reverse) wave and exogenous variation in regime type The logic behind the estimation method and the procedure (regressions in two stages with regime type as dependent variable in first stage)

Data  Global sample, 120+ countries,  ICRG data on PR Investment index Order and Law index  Polity data on democracy  Control variables: Ln GDP pc, Ln population, Ln regime duration, region dummies, plurality religion dummies, colonizer dummies, year dummies (plus country dummies in FE)

Results; Y: ICRGPROP, X: Polity, Z: REVWAVE MethodTime controls Polity- coefficient T-valueObs. G2SLS-RENo ***2481 G2SLS-REYes ***2481 2SLS-FENo ***2481 2SLS-FEYes ***2481

Differentiating dictatorships Regime dummy OLS with PCSE REFE Coeff.T-val.Coeff.T-val.Coeff.T-val. Military *** *** *** Monarchy *** Dominant party *** One-Party * *** *** Auth. Multi- party ** *** ***

Conclusions  Democracy is estimated to have a strong, positive effect on PR Increase from 1/6 to 1/3 of the ICRGPROP range, when going from -10 to +10 on Polity Robust Even when endogeneity, control variables, time effects and country effects taken into account  Monarchies (dynasties and time horizon) and dominant party (right-wing) regimes as the types of dictatorship that do relatively better at protecting PR.