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International audience; Using an online randomized experiment in the context of the 2019 European elections campaign in France, we study how fact-checking affects sharing of false news on social media. We exposed a random sample of French voting-age Facebook users to statements on the role of the European Union made by the far-right populist party Rassemblement National.A randomly selected subgroup of participants was also presented with fact-checking of these statements; another subgroup was offered achoice whether to view the fact-checking information. Then, all participants could choose whether to share the false statements on their Facebookpages. We show that (i) both imposed and voluntary fact-checking reduce sharing of false statements by about 45\%; (ii) the size of the effectis similar between imposed and voluntary fact-checking; and (iii) each additional click required to share false statements substantiallyreduces sharing. These results inform the debate about policy proposals aimed at limiting propagation of false news on social media.

Social media changes traditional-media news on conflicts. Online posts by citizen journalists — first-hand witnesses of conflict events — change the extent, tonality, and content of traditional-media reporting of conflicts. Using an exogenous and excludable variation in social-media posts in Israel and Palestine, driven by internet outages as a result of lightning strikes and technical failures, we show that, when social media in the conflict zone is not muted by internet outages, conflict news stories on US TV are more numerous and longer. Text analyses reveal that these stories have higher emotional intensity and focus more on the suffering of civilians and less on the role of US foreign policy or elections. The results suggest that social-media-driven democratization of the conflict news, i.e., the shift of focus from information provided by war gatekeepers to information from ordinary people, helps the narrative on the side of the conflict that has more civilian casualties.

International audience; How does mobile broadband internet affect approval of government? Using surveys of 840,537 individuals from 2,232 subnational regions in 116 countries in 2008-2017 from the Gallup World Poll and the global expansion of third generation (3G) mobile networks, we show that an increase in mobile broadband internet access reduces government approval. This effect is present only when the internet is not censored and is stronger when traditional media is censored. This effect is reversed in the few countries with the lowest corruption. 3G helps expose actual corruption in government: revelations of the Panama Papers and corruption incidents translate into higher perceptions of corruption in regions covered by 3G networks. The disillusionment of voters in governments had electoral implications: In Europe, the expansion of mobile broadband internet led to a decrease in the vote shares of incumbent parties and an increase in the vote shares of the antiestablishment populist opposition. The vote shares of the nonpopulist opposition were unaffected by the expansion of 3G networks.

We study the long-run effects of forced migration on investment in education. After World War II, millions of Poles were forcibly uprooted from the Kresy territories of eastern Poland and resettled (primarily) in the newly acquired Western Territories, from which the Germans were expelled. We combine historical censuses with newly collected survey data to show that, while there were no pre-WWII differences in educational attainment, Poles with a family history of forced migration are significantly more educated today than other Poles. These results are driven by a shift in preferences away from material possessions toward investment in human capital. (JEL I25, I26, J24, N34, R23)

How does mobile broadband internet affect approval of government? Using surveys of 840,537 individuals from 2,232 subnational regions in 116 countries in 2008-2017 from the Gallup World Poll and the global expansion of third generation (3G) mobile networks, we show that an increase in mobile broadband internet access reduces government approval. This effect is present only when the internet is not censored and is stronger when traditional media is censored. This effect is reversed in the few countries with the lowest corruption. 3G helps expose actual corruption in government: revelations of the Panama Papers and corruption incidents translate into higher perceptions of corruption in regions covered by 3G networks. The disillusionment of voters in governments had electoral implications: In Europe, the expansion of mobile broadband internet led to a decrease in the vote shares of incumbent parties and an increase in the vote shares of the antiestablishment populist opposition. The vote shares of the nonpopulist opposition were unaffected by the expansion of 3G networks.

International audience; How do the internet and social media affect political outcomes? We review empirical evidence from the recent political-economy literature, focusing primarily on the work that considers traits that distinguish the internet and social media from traditional offline media, such as low barriers to entry and reliance on user-generated content. We discuss the main results about the effects of the internet, in general, and social media, in particular, on voting, street protests, attitudes toward government, political polarization, xenophobia, and politicians’ behavior. We also review evidence on the role of social media in the dissemination of false news, and we summarize results about the strategies employed by autocratic regimes to censor the internet and to use social media for surveillance and propaganda. We conclude by highlighting open questions about how the internet and social media shape politics in democracies and autocracies.

We study horizontal between-group cultural transmission using a unique historical setting, which combines exogenous group exposure with no control over how and whether the representatives of different groups interact. Stalin’s ethnic deportations during WWII moved over 2 million people --- the majority of whom were ethnic Germans and Chechens --- from the Western parts of the USSR to Central Asia and Siberia. As a result, the native population of the deportation destinations was exposed to groups with drastically different gender norms. Combining historical archival data with contemporary surveys, we document that gender norms diffused from deportees to the local population, resulting in changes in attitudes and behavior. Norms of gender equality diffused more than norms of gender discrimination. Identification relies on the fact that, within subnational regions, the local population was fairly homogeneous, while deportation destinations were determined by local demands for manual labor, orthogonal to identity and skills of deportees, making the variation in the group composition of the deportations across destination localities exogenous, conditional on the deportation size and region fixed effects.

International audience; How effective is fact checking in countervailing “alternative facts,” i.e., misleading statements by politicians? In a randomized online experiment during the 2017 French presidential election campaign, we subjected subgroups of 2480 French voters to alternative facts by the extreme-right candidate, Marine Le Pen, and/or corresponding facts about the European refugee crisis from official sources. We find that: (i) alternative facts are highly persuasive; (ii) fact checking improves factual knowledge of voters (iii) but it does not affect policy conclusions or support for the candidate; (iv) exposure to facts alone does not decrease support for the candidate, even though voters update their knowledge. We find evidence consistent with the view that at least part of the effect can be explained by raising salience of the immigration issue.

We document substantial increases in agricultural productivity, industrial output, and peasants' nutrition in Imperial Russia as a result of the abolition of serfdom in 1861. Before the emancipation, provinces where serfs constituted the majority of agricultural laborers lagged behind provinces that primarily relied on free labor. The emancipation led to a significant but partial catch up. Better incentives of peasants resulting from the cessation of ratchet effect were a likely mechanism behind a relatively fast positive effect of reform on agricultural productivity. The land reform, which instituted communal land tenure after the emancipation, diminished growth in productivity in repartition communes. (JEL J47, N13, N33, N43, N53, Q11)

Performance-based promotion schemes in administrative hierarchies have limitations. Chinese provincial leaders, despite facing strong career concerns, make different policy decisions depending on their career backgrounds. Provincial party secretaries who have risen from low to high positions within the province they govern (“locals”) spend a higher share of budgetary resources on education and health care and invest less in construction infrastructure than party secretaries who have made their most significant career advancements in other provinces (“outsiders”). Identification comes from variation in central leadership and term limits. As the promotion mechanism rewards infrastructure investments, locals are less likely to be promoted at the end of the term. We explore various mechanisms and provide evidence that the difference between locals and outsiders is not driven by knowledge or experience. Several pieces of evidence suggest that locals cater to low-level provincial elites, who helped them rise to power. Thus, local career trajectories limit the power of career concerns by fostering competing allegiances.

International audience; Poland was divided among three empires—Russia, Austria–Hungary, and Prussia—for over a century until 1918. The partition brought about divergence in culture, institutions, and economic development. We use spatial regression discontinuity to examine, which empire effects are persistent. We find that differences in incomes, industrial production, education, corruption, and trust in government institutions disappeared with time as they were smoothed by economic forces and policy intervention. In contrast, differences in intensity of religious practices and in beliefs in democratic ideals, i.e., democratic capital, persist presumably via inter-generational within-family transmission. Differences in railroad infrastructure built by empires during industrialization persisted to this day. Cultural empire legacies have an effect on the political outcomes in contemporary Poland.

We exploit a unique historical setting to study the long-run effects of forced migration on investment in education. After World War II, the Polish borders were redrawn, resulting in large-scale migration. Poles were forced to move from the Kresy territories in the East (taken over by the USSR) and were resettled mostly to the newly acquired Western Territories, from which Germans were expelled. We combine historical censuses with newly collected survey data to show that, while there were no pre-WWII differences in education, Poles with a family history of forced migration are significantly more educated today. Descendants of forced migrants have on average one extra year of schooling, driven by a higher propensity to finish secondary or higher education. This result holds when we restrict ancestral locations to a subsample around the former Kresy border and include fixed effects for the destination of migrants. As Kresy migrants were of the same ethnicity and religion as other Poles, we bypass these confounding factors characteristic of other cases of forced migration. We show that labor market competition with natives and the selection of migrants are also unlikely to drive our results. Survey evidence suggests that forced migration led to a shift in preferences, away from material possessions and towards investment in a mobile asset -- human capital. The effects persist over three generations.

Politicians may strategically time unpopular measures to coincide with newsworthy events that distract the media and the public. We test this hypothesis in the context of the Israeli-Palestinian conflict. We find that Israeli attacks are more likely to occur when US news on the following day is dominated by important predictable events. Strategic timing applies to attacks that bear risk of civilian casualties and are not too costly to postpone. Content analysis suggests that Israel’s strategy aims at minimizing next-day coverage, which is especially charged with negative emotional content. Palestinian attacks do not appear to be timed to US news.

We document the unequal enforcement of liberalization reform of business regulation across Russian regions with different governance institutions, which leads to unequal effects of liberalization. National liberalization laws were enforced more effectively in subnational regions with more transparent government, a more informed population, a higher concentration of industry, and stronger fiscal autonomy. As a result, liberalization had a substantial positive effect on the performance of small firms and the growth of the official small business sector in regions with stronger governance institutions. In contrast, in regions with weaker governance institutions, we observe no effect of reform and, in some cases, even a negative effect.

All over the world market-dominant minorities are victims of ethno-religious hatred and violence. This paper aims to test the theory that ethnic violence had pragmatic economic roots and ethnic violence was directly related to occupational segregation across ethnicities against the alternative “scapegoat theory,” according to which Jews were blamed for all economic misfortunes of the majority. In order to test these theories, we focus on pogroms between 1800 and 1939, i.e., episodes of anti-Jewish violence, in the Pale of Settlement, where Jews were confined to live within the Russian Empire. We combine a novel data set on pogroms and the professional and ethnic composition of the Russian Empire with data on historical climate and yield data. Using fixed-effects model, we document that heat stress in growing season, i.e., spring, leads to a fall in grain yield. Then, we exploit heat stress in spring as an exogenous source of variation in income and find that negative income shocks increase the likelihood of violence against Jews, but only during pogrom waves that are triggered by political turmoil. We find that the likelihood of anti-Jewish violence in the face of an income shock is higher in localities with a greater Jewish concentration among creditors. Our findings show that the ethno-economic segregation is an important determinant of violence against minorities.

How effective is fact checking in countervailing "alternative facts,'' i.e., misleading statements by politicians? In a randomized online experiment during the 2017 French presidential election campaign, we subjected subgroups of 2480 French voters to alternative facts by the extreme-right candidate, Marine Le Pen, and/or corresponding facts about the European refugee crisis from official sources. We find that: (i) alternative facts are highly persuasive; (ii) fact checking improves factual knowledge of voters (iii) but it does not affect policy conclusions or support for the candidate; (iv) exposure to facts alone does not decrease support for the candidate, even though voters update their knowledge. We find evidence consistent with the view that at least part of the effect can be explained by raising salience of the immigration issue.

We provide evidence of corruption in allocation of public procurement and assess its efficiency. Firms with procurement revenue increase tunneling around regional elections, whereas neither tunneling of firms without procurement revenue, nor legitimate business of firms with procurement exhibits a political cycle. Data are consistent with the corruption channel—cash is tunneled to politicians in exchange for procurement contracts—and inconsistent with alternative channels. Using the strength of correlation between procurement revenue and tunneling around elections as a proxy for local corruption, we reject the “efficient grease” hypothesis: in more corrupt localities, procurement contracts go to unproductive firms. (JEL D22, D72, H57, K42, P26, P31, P37)

Bankruptcy laws aim to protect creditors, introduce pressure on managers for financial discipline and restructuring and free assets from inefficient use. Effectiveness of Russian Bankruptcy law is undermined by the political capture of arbitration courts by the regional authorities. Governors in alliance with managers of large regional enterprises use bankruptcy procedure as a mechanism for expropriation of the federal government and outside investors. Recent amendments to the Bankruptcy law, formally motivated by the apparent inefficiencies of current bankruptcy practice, fail to improve creditors protection, while they provide additional power to incumbent managers and governmental agencies.

Does fiscal decentralization lead to more efficient governance, better public goods, and higher economic growth? This paper tests Riker’s theory (1964) that the results of fiscal decentralization depend on the level of countries’ political centralization. We analyze crosssection and panel data from up to 75 developing and transition countries for 25 years. Two of Riker’s predictions about the role of political institutions in disciplining fiscally-autonomous local politicians are confirmed by the data. 1) Strength of national political parties significantly improves outcomes of fiscal decentralization such as economic growth, quality of government, and public goods provision. 2) In contrast, administrative subordination (i.e., appointing local politicians rather than electing them) does not improve the results of fiscal decentralization.

In this review, the author reflects on the heated debates around views about Russia's postcommunist transition expressed in essays collected in new Andrei Shleifer's book, A Normal Country: Russia after Communism (Harvard University Press, 2005), which were initially published at different times during transition. She focuses on the three questions that have been in the center of the debate among academics and policymakers: What should the sequencing and the speed of reforms be? Should a country have political centralization for fiscal decentralization to be efficient? Is Russia normal? The author argues that Russia's most recent history provides convincing evidence in support of the logic of political and economic transformation as it was understood by Shleifer as early as the beginning of the 1990s.

How far can the media protect or undermine democratic institutions in unconsolidated democracies, and how persuasive can they be in ensuring public support for dictator's policies? We study this question in the context of Germany between 1929 and 1939. Using geographical and temporal variation in radio availability, we show that radio had a significant negative effect on the Nazi electoral support between 1929 and 1932, when political news were slanted against Nazi party. This effect was reversed in just 5 weeks following Hitler's appointment as chancellor and the transfer of control of the radio to the Nazis. Pro-Nazi radio propaganda caused higher vote for the Nazis in March 1933 election. After full consolidation of power, radio propaganda helped the Nazis to enroll new party members and encouraged denunciations of Jews and other open expressions of anti-Semitism. The effect of Nazi propaganda was not uniform. Depending on listeners' priors about the message, propaganda could be very effective or could backfire. Nazi radio was most effective in places where anti-Semitism was historically high and had a negative effect on the support for anti-Semitic policies in places with historically low anti-Semitism.

Policy makers may strategically time unpopular measures to coincide with other newsworthy events that distract the media and the public, so as to minimize the political cost of these measures. We test this hypothesis in the context of the recurrent Israeli-Palestinian conflict. Combining daily data on attacks on both sides of the conflict with data on the content of evening news for top U.S. TV networks, we show that Israeli attacks are more likely to be carried out when U.S. news are expected to be dominated by important (non-Israel-or-Palestine-related) events on the following day. Several findings indicate that this association is a result of the strategic behavior of Israeli authorities: i) only attacks that bear higher risk of civilian casualties are timed to newsworthy events; ii) attacks are timed to events that are predictable, and iii) the timing of Israeli retaliations against Palestinian attacks is related to U.S. news only in periods of less intense fighting, when retaliation is less urgent. Based on comprehensive content analysis of conflict-related news, we document that the strategic timing of Israeli attacks is aimed at minimizing news coverage on the following day because next-day news stories are especially charged with negative emotional content. We find no evidence of strategic timing for Palestinian attacks.

We document a very large increase in agricultural productivity, peasants’ living standards, and industrial development in the 19th century Imperial Russia as a result of the abolition of serfdom. We construct a novel province-level panel dataset of development outcomes and conduct a difference-in-differences analysis relying on cross-sectional variation in the shares of serfs and over-time variation in emancipation controlling for region-specific trends. We disentangle the effects of the emancipation and the subsequent land reform and show that land reform contributed negatively to agricultural productivity in contrast to a large positive effect of the emancipation. The evidence is consistent with the increase in the power of the peasant commune as the channel of the negative effect of the land reform. The different organizational forms of serfdom were associated with different levels of nutrition of serfs and productivity. The emancipation of serfs from estates where serfs were obliged to work on the landlord’s farm (corvee, barshchina) caused an increase in height of their children by 1.6 centimeters. Estates where serfs were required to make in kind payment to the landlord (quitrent, obrok) were equally productive, but, in contrast, their emancipation did not lead to rise in their height. Commitment to an implicit longer-term contract on the amount of serf obligations to landlords, practiced in some estates, made serfdom more productive.

This paper tests the theory of opportunistic cycles in a decade-old democracy, Russia, finds strong evidence of cycles, and provides explanation for why previous literature often found weaker evidence. Using the comprehensive list of Russia's regional elections and regional monthly panel data between 1996 and 2003, we find that: (1) budget cycle is very sizable and short-lived: large expansion and contraction in fiscal spending occur within two months of elections on both sides; (2) the magnitude of the cycle decreases with government transparency, level of regional democracy, and voter awareness; (3) cycle becomes smaller over time; (4) pre-electoral manipulation increases incumbents’ chances for re-election. The results confirm theoretical findings that maturity of democracy, transparency, and voter awareness are important in determining the scope for opportunistic cycles. The short length of the cycle explains underestimation of its size by previous literature because of low frequency data used.

Three hypotheses about the nature of federal tax arrears in Russia in the second half of the 1990s are tested empirically. Tax arrears can be a result of: 1) liquidity problems in firms, 2) redistributive subsidies of the federal government, or 3) regional political resistance to federal tax collectors. Liquidity problems in firms explain a large part of the variation in tax arrears. Regional political resistance to federal tax collectors was also an important factor: For a given level of liquidity, federal arrears accumulated faster in regions where governors had a larger popular base, in regions with a better bargaining position vis-a-vis the centre, and in regions with governors in political opposition to the centre. We find that patterns of federal arrears are inconsistent with the redistributive politics premise that redistribution favours jurisdictions with 'closer races' for the incumbent in the national elections. Variation in authorized tax deferrals can be explained in part by federal redistributive politics.

In textbook theory, demand curves for stocks are kept flat by riskless arbitrage between perfect substitutes. In reality, however, individual stocks do not have perfect substitutes. We develop a simple model of demand curves for stocks in which the risk inherent in arbitrage between imperfect substitutes deters risk‐averse arbitrageurs from flattening demand curves. Consistent with the model, stocks without close substitutes experience higher price jumps upon inclusion into the S&P 500 Index. The results suggest that arbitrage is weaker and mispricing is likely to be more frequent and more severe among stocks without close substitutes.

Governments that levy predatory regulation and provide few weak legal institutions draw businesses into the unofficial economy and compel them to hire private protection organizations. Based on a survey of shopkeepers in three cities in Russia, we find that retail shops face very high levels of predatory regulation and have frequent contacts with private protection rackets. In addition, we show that higher levels of regulation are associated with weaker legal institutions and a higher probability of contact with a private protection organization. We also find that shopkeepers view private protection organizations primarily as a substitute for state-provided police protection and state-provided courts. These results emphasize the importance of public sector reform as a component of economic transition. Copyright 2000 by Oxford University Press.

We investigate the long-term effects of the important presence of Jews in Eastern Europe before the Second World War and their disappearance during the Holocaust. The Pale of Settlement, the area which Jewish residents were confined to in the Russian Empire, is used as a source of exogenous variation in the size of the Jewish population before the Second World War. Based on election and survey data, we find that current residents of the Pale, compared to their counterparts outside the Pale, vote more for socialist anti-market parties, have lower support for market economy and democracy, are less engaged in entrepreneurship, but exhibit higher levels of trust. At the same time, the Pale has no lasting effects on average consumption, income, and education levels. Regression discontinuity at the Pale border helps identification. We show that the effect of the Pale is related to the former presence of Jews rather than the inflow of new migrant population into the formerly-Jewish areas. We suggest a possible mechanism and present evidence consistent with it: non-Jewish population, at the time when two groups lived together side-by-side, developed persistent anti-market culture and bonding trust, rooted in ethnic hatred towards Jews. We show that, consistent with the mechanism, current residents of towns closer to places of pogroms exhibit higher trust and anti-market attitudes even controlling for the historical share of Jews in the population and the Pale.

How do the media affect public support for democratic institutions in a fragile democracy? What role do they play in a dictatorial regime? We study these questions in the context of Germany of the 1920s and 1930s. During the democratic period, when the Weimar government introduced pro-government political news, the growth of Nazi popularity slowed down in areas with access to radio. This effect was reversed during the campaign for the last competitive election as a result of the pro-Nazi radio broadcast following Hitler’s appointment as German chancellor. During the consolidation of dictatorship, radio propaganda helped the Nazis to enroll new party members. After the Nazis established their rule, radio propaganda incited anti-Semitic acts and denunciations of Jews to authorities by ordinary Germans. The effect of anti-Semitic propaganda varied depending on the listeners’ predispositions toward the message. Nazi radio was most effective in places where anti-Semitism was historically high and had a negative effect in places with historically low anti-Semitism.

Poland was divided among three empires — Russia, Austria-Hungary, and Prussia — for over a century until 1918. The partition brought about divergence in culture, institutions, and economic development. We use spatial regression discontinuity to examine, which empire effects are persistent. We find that differences in incomes, industrial production, education, corruption, and trust in government institutions disappeared with time as they were smoothed by economic forces and policy intervention. In contrast, differences in intensity of religious practices and in beliefs in democratic ideals, i.e., democratic capital, persist presumably via inter-generational within-family transmission. Differences in railroad infrastructure built by empires during industrialization persisted to this day. Cultural empire legacies have an effect on the political outcomes in contemporary Poland.

Studies of mass support for economic reform reveal a simple conclusion: Everyone hates privatization. Yet whether respondents hold this view due to a preference for state property or concerns about the legitimacy of privatization is unclear. We test these arguments using a 2006 survey of 28,000 individuals in 28 post-communist countries and find that a lack of human capital affects support for revising privatization primarily via a preference for state property over private property; whereas transition-related hardships influence support for revising privatization due to both a preference for state property and concerns about the legitimacy of privatization. These results suggest the value of analyses that not only link respondent traits with support for policy, but that also probe the motivations that underpin this support. They also indicate that opposition to privatization should not be equated with support for renationalization.

We provide evidence of corruption in allocation of public procurement and assess its efficiency. Firms with procurement revenue increase tunneling around regional elections, whereas neither tunneling of firms without procurement revenue, nor legitimate business of firms with procurement exhibits a political cycle. Data are consistent with the corruption channel - cash is tunneled to politicians in exchange for procurement contracts - and inconsistent with alternative channels. Using the strength of correlation between procurement revenue and tunneling around elections as a proxy for local corruption, we reject the "efficient grease" hypothesis: in more corrupt localities, procurement contracts go to unproductive firms.

How do nationalistic media affect animosity between ethnic groups? We consider one of Europe’s deadliest conflicts since WWII: the Serbo-Croatian conflict. We show that, after a decade of peace, cross-border nationalistic Serbian radio triggers ethnic hatred towards Serbs in Croatia. Mostly attracted by non-political content, many Croats listen to Serbian public radio (intended for Serbs in Serbia) whenever signal is available. As a result, the vote for extreme nationalist parties is higher, and ethnically offensive graffiti are more common, in Croatian villages with Serbian radio reception. A laboratory experiment confirms that Serbian radio exposure causes anti-Serbian sentiment among Croats.

We investigate the long-term effects of the important presence of Jews in Eastern Europe before the Second World War and their disappearance during the Holocaust. The Pale of Settlement, the area which Jewish residents were confined to in the Russian Empire, is used as a source of exogenous variation in the size of the Jewish population before the Second World War. Based on election and survey data, we find that current residents of the Pale, compared to their counterparts outside the Pale, vote more for socialist anti-market parties, have lower support for the market economy and democracy, are less engaged in entrepreneurship, but exhibit higher levels of trust. At the same time, the Pale has no lasting effects on average consumption, income, and education levels. Regression discontinuity at the Pale border helps identification. We show that the effect of the Pale is related to the former presence of Jews rather than the inflow of new migrant population into the formerly-Jewish areas. We suggest a possible mechanism and present evidence consistent with it: the non-Jewish population, at the time when two groups lived together side-by-side, developed a persistent anti-market culture and bonding trust, rooted in ethnic hatred towards Jews. We show that, consistent with the mechanism, current residents of towns closer to places of pogroms exhibit higher trust and anti-market attitudes even controlling for the historical share of Jews in the population and the Pale.

We test the premise of the theoretical literature that M-form political hierarchies are effective in creating yardstick competition between regional divisions only when those divisions have sufficiently diversified or similar industrial composition. The reason for this is that the competition among poorly diversified inter-related divisions creates incentives for regional leaders to pursue policies that inhibit industrial growth in neighboring regions in order to make their own region look better from the point of view of the center. We use a unique episode in Soviet history, when a traditional Soviet unitary-form (U-form) hierarchy was replaced by a multidivisional-form (M-form) organization, namely, Khrushchev's Sovnarkhoz reform. First, we demonstrate that during this reform regional leaders were subjected to relative performance evaluation, which created incentives to generate industrial growth. Second, we show that these career concerns resulted in higher growth in regions with sufficiently diversified and, therefore, self-contained economies, and lower growth in highly specialized regions.

We provide a new compilation of data on ethnic, linguistic, and religious composition at the subnational level for a large number of countries. Using these data, we measure segregation of groups within the country. To overcome the endogeneity problem that arises because of mobility and endogenous in ternal borders, we construct an instrument for segregation. We find that more ethnically and lin guistically segregated countries, i.e., those where groups live more spatially separately, have a lower quality of government; there is no relationship between religious segregation and governance. Trust is an important channel of influence; it is lower in more segregated countries. (.JEL HI 1, H77, J15, 017, Z12, Z13) Racial and religious conflicts are often associated with poor politicoeconomic performance, especially in developing countries. Economists have recently turned their attention to ethnolinguistic fractionalization as an explanation of differences in the pace of development, starting with an influential paper by William Easterly and Ross Levine (1997). Since then, many others have shown that fractionalization is negatively correlated with a host of policy outcomes and the quality of government.1 However, many ethnically diverse countries (the United States, for instance) are quite successful. What makes different countries more or less capable of handling

Which factors stand in the way of cooperation between countries formerly at war? We examine the role of nationalistic content of a media outlet reaching citizens of a neighboring country. We consider radio signals travelling across borders in the region that witnessed one of Europe’s deadliest conflicts since WWII: the Serbo-Croatian conflict in the Yugoslavian wars. Using survey and election data, we show that, after a decade since the end of the war, cross-border nationalistic Serbian radio triggers animosity towards Serbs in Croatia, potentially endangering peace. In particular, we find that a large fraction of Croats listen to Serbian radio (intended for Serbian listeners across the border) whenever signal is available. The residents of Croatian villages with good-quality signal of Serbian public radio are more likely to vote for extreme nationalist parties. In addition, ethnically offensive graffiti are more common in villages with Serbian radio reception. A laboratory experiment confirms that Serbian radio exposure causes an increase in anti-Serbian sentiment among Croats.

We test the premise of the theoretical literature that M-form political hierarchies are effective in creating yardstick competition between regional divisions only when divisions have sufficiently diversified or similar industrial composition. The reason is that the competition among poorly-diversified inter-related divisions creates incentives for regional leaders to pursue policies that hurt growth of the neighboring regions in order to make their own region look better from the point of view of the center. We use a unique episode in Soviet history, when a traditional Soviet unitary-form (U-form) hierarchy was replaced by a multidivisional-form (M-form) organization, namely, the Khrushchev’s “Sovnarkhoz” reform. First, we demonstrate that during this reform regional leaders were subjected to relative performance evaluation which created career concerns to generate industrial growth. Second, we show that these career concerns resulted in higher growth in regions with sufficiently diversified and, therefore, self-contained economies and resulted in lower growth in highly specialized regions.

Performance-based promotion schemes in administrative hierarchies have limitations. Chinese provincial leaders, despite facing strong career concerns, make different policy decisions depending on their career backgrounds. Provincial party secretaries who rose from low to high positions within the province they govern ("locals'') spend a higher share of budgetary resources on education and health care and invest less in construction infrastructure than party secretaries who made their most significant career advancements in other provinces ("outsiders''). Identification comes from variation in central leadership and term limits. As the promotion mechanism rewards infrastructure investments, locals are less likely to be promoted at the end of the term. We explore various mechanisms and provide evidence that the difference between locals and outsiders is not driven by knowledge or experience, but can be explained by locals catering to low-level provincial elites, who helped them rise to power. Thus, local career trajectories limit the power of career concerns by fostering competing allegiances.

The optimal degree of decentralization depends on the importance of inter-state externalities of local policies. We show that inter-state externalities are determined by the spatial distribution of interest groups within the country. Interest groups who have multi-state scope internalize inter-state externalities to a larger extent than the lobbyists with interests within a single state. We use variation in the geographic boundaries of politically-powerful industrial interests to estimate the effect of inter-state externalities on firm performance. Using firm-level panel data from a peripheralized federation, Russia in 1996-2003, we show that, controlling for firm fixed effects, the performance of firms substantially improves with an increase in the number of neighboring regions under influence of multi-regional business groups compared to the number influenced by local business groups. Our findings have implications for the literatures on federalism and on international trade as trade restrictions are a common source of inter-state externalities.

We use data from the 2006 round of the Russian Longitudinal Monitoring Survey (RLMS) to describe perceptions of the Russian population about the transition process and the role of the state compared to that of free markets. We find that about one half of Russian population is disappointed with transition and a large majority is in favor of high state regulation and state provision of goods and services. High demand for government regulation and increased state intervention coexists with a low level of trust in government institutions and recognition of high and rising levels of corruption. The findings are consistent with the theory developed by Aghion et al. (2009). In an environment with poor social capital, private business imposes negative externalities on the society and society chooses to demand more state regulation and tolerate corruption in order to reduce these externalities. We also find that individual perceptions of social capital and corruption co-vary with the demand for regulation, as predicted by the theory.

This paper has three goals. The first (and perhaps the most important one) is to provide a new compilation of data on ethnic, linguistic and religious composition at the sub-national level for a large number of countries. This data set allows us to measure segregation of different ethnic, religious and linguistic groups within the same country. The second goal is to correlate measures of segregation with measures of quality of the polity and policymaking. The third is to construct an instrument that helps to overcome the endogeneity problem due to the fact that groups move within country borders, partly in response to policies. Our results suggest that more segregated countries in terms of ethnicity and language, i.e., those where groups live more spatially separately, have a substantially lower quality of government. In contrast, there is no relationship between religious segregation and the government quality.

Studies of mass support for economic reform reveal a simple conclusion: Everyone hates privatization. Yet whether respondents hold this due to material self-interest or concerns about the legitimancy or outcomes of privatization view is unclear. We test these arguments using a 2006 survey of 28,000 individuals in 28 post-communist countries and find that a lack of human capital affects support for revising privatization primarily via a preference for state property over private property; whereas transition-related hardships influence support for revising privatization due to both a preference for state property and concerns about the legitimacy of privatization. These results suggest the value of analyses that not only link respondent traits with support for policy, but that also probe the motivations that underpin this support. They also indicate that opposition to privatization should not be equated with support for renationalization.

We study the nature of career concerns of regional leaders in Soviet Russia under Khrushchev and Brezhnev. We document a substantial over-time variation in career concerns associated with reforms of Soviet governing hierarchy. We demonstrate that Khrushchev’s “Sovnarkhoz” system—a unique episode in Soviet history, when a traditional Soviet unitary-form (U-form) hierarchy was replaced by a multidivisional-form (M-form) organization—created yardstick competition in industrial performance of regional leaders. High-powered career incentives, however, did not result in faster industrial growth on average. We find that only two groups of regional leaders performed better in response to increased incentives. 1) Leaders appointed during “Sovnarkhoz” were able to learn new rules better. 2) Leaders with good connections to their neighbors were able to overcome negative inter-regional externalities, a common byproduct of M-form. The lack of success of the “Sovnarkhoz” system triggered the separation of regional units along production branch lines, which, as we show, led to a substantial decrease of industrial growth rates. The failure of Khrushchev's management reforms together with the U-form lobby contributed to his dismissal and reinstatement of the U-form hierarchy under Brezhnev.

Despite strong growth performance in transition economies in the last decade, residents of transition countries report abnormally low levels of life satisfaction. Using data from the World Values Survey and other sources, we study various explanations of this phenomenon. First, we document that the disparity in life satisfaction between residents of transition and nontransition countries is much larger among the elderly. Second, we find that deterioration in public goods provision, an increase in macroeconomic volatility, and a mismatch of human capital of residents educated before transition (which disproportionately affects the aged population) explain a great deal of the difference in life satisfaction between transition countries and other countries with similar income and other macroeconomic conditions. The rest of the gap is explained by the difference in the quality of the samples. As in other countries, life satisfaction in transition countries is strongly related to income; but, due to a higher nonresponse of high-income individuals in transition countries, the survey-data estimates of the recent increase in life satisfaction, driven by 10-year sustained economic growth in transition region, are biased downwards. The evidence suggests that if the region keeps growing, life satisfaction in transition countries will catch up with the “normal” level in the near future.

In this chapter we attempt to assess the results of Putin’s centralization and anti-corruption measures on the overall level of state capture in the Russian regions as well as on the balance of power between different interest groups. We proceed by, first, describing the results of previous research on state capture in Russia’s regions during Yeltsin in Section 2 and, then, analysing the changes in the nature and the level of state capture during Putin’s administration in Section 3. Section 4 concludes.