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Losing Your Dictator: Firms During Political Transition

July 2018

Joint work with Mounu Prem

We use new firm-level data from Chile to study how political networks affect resource misallocation in a transition from dictatorship to democracy. We find that firms with links to the Pinochet regime (1973–1990) were relatively unproductive and benefited from resource misallocation during the dictatorship, and those distortions persisted into democracy. We show that, after learning that the dictatorship was going to end, firms in the dictator's network increased their productive capacity, experienced higher profits, and obtained more loans from the state-owned bank. We test for different explanations and provide suggestive evidence consistent with connected firms aiming to shield their market position for the transition to democracy. 


 Source: Nelson Arancibia

Collective Action in Networks: Evidence from the Chilean Student Movement

July 2018

Hundreds of thousands of students skipped school during the 2011 student movement in Chile to protest and reform educational institutions. Using administrative data on millions of students' daily school attendance on protest days, this paper presents robust evidence of school absenteeism following a threshold model of collective behavior. Students skipped school on a protest day only when more than 40% of the members of their networks also skipped school. Importantly, even though I show skipping school imposed significant educational costs on students, I also show it helped to shift votes towards non-traditional opposition parties in the 2012 local elections, candidates who were relatively more aligned with students’ demands.


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The Privatization Origins of Political Corporations

June 2018

Joint work with Mounu Prem and Francisco Urzúa

We show how the sale of state owned firms in dictatorships may lead to the creation of political corporations operating in democracies. Using several novel datasets, we characterize the privatizations of the Pinochet regime in Chile using a data driven algorithm, confirming that some state owned firms were sold underpriced to politically connected individuals. We then show how firms with crooked privatization processes grew and benefited from Pinochet and in democracy formed political connections, financed political campaigns, and were more likely to appear in the Panama Papers. These results reveal how authoritarian regimes can influence a subsequent democracy and document a way in which political corporations are created.


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Distorted Quality Signals in School Markets

June 2018

Nominated to the Juan Luis Londoño Prize to best paper on social issues by a young researcher

Joint work with José ignacio Cuesta and Cristián Larroulet

Information plays a key role in markets with consumer choice. In education, data on schools is often gathered through standardized testing. However, the use of these tests has been controversial because of distortions in the metric itself. We study the Chilean educational market and document that low-performing students are underrepresented in test days, generating distortions in school quality information. These distorted quality signals affect parents' school choice and induce misallocation of public programs. These results provide novel evidence for the costs that distortions in quality signals generated by standardized tests in accountability systems impose on educational markets.


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The Value of Political Capital: Dictatorship Collaborators as Business Elites

Revise and resubmit, Journal of Economic Behavior & Organization

Joint work with Mounu Prem

What is the value of political capital for individuals? Towards the end of the Pinochet dictatorship in Chile, military and civilian collaborators entered the business elite, controlling the largest and most important firms in the country. Using a novel panel dataset of board members in these firms, we document a work premium for those who had previously collaborated with Pinochet. After democratization, however, collaborators were removed from boards and their compensation premium disappeared. These results suggest that dictatorship collaborators earn a premium in the business world in dictatorship, but not in democracy.


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Recruiting Migrants for Development: Consequences of a 19th Century Settlement Policy

Reject and resubmit, Explorations in Economic History

This paper studies a settlement policy implemented by the Chilean government between 1882 and 1904 to analyze the relationship between European immigration and development. Based on historical census data, I show that this settlement policy was successful in recruiting Europeans, who located in different parts of the country. Using a panel data of provinces observed between 1860 and 1920, I find a strong, positive, and robust correlation between recruited Europeans and measures of development. Moreover, the arrival of Europeans is strongly associated with local economic output fifty years after the policy was terminated. These results together with narrative historical evidence suggest that the settlement policy was successful in triggering local development.