Working Papers
Contested Unity (Job Market Paper)
Abstract. I develop a dynamic theory to examine how an inclusive national identity can emerge in societies with cultural divisions between the Majority and minority groups. While agreements on common good provision can arise under exogenously fixed valuations and static preferences, real-world scenarios often feature asymmetries where one group favors the common good and others prioritize their own identity-specific goods. In this environment, alongside known equilibria of majority dominance, revolt, and resource splitting, I demonstrate that even without mutual tendencies toward a common good, a majority decision-maker can foster an integration process by providing the minority’s ideal alongside the common good. This costly investment by the majority paves the way for new equilibria where successful integration leads both groups to fully value the common good, mitigating the risks of resource splitting and minimizing societal divisions. The key findings highlight how cultural transmission can facilitate the emergence of an inclusive national identity. Conversely, the model also shows that in the absence of such investment, persistent divisive preferences can lead to enduring societal fragmentation.
Nation-State Building (with Chris Bidner)
Abstract. We develop a simple dynamic theory of Nation-States in which Elites choose investments in both State-building and Nation-building. In our approach nation-building works towards homogenization of citizens by making it easier for them to coordinate and demand for more frequent redistributions. A more coordinated citizenry will accept lower transfers in the current period, making it possible for the Elites to pacify their threats. Our mechanism puts the emphasis on social conflicts rather than external threats in the emergence of nation-building investments. It also highlights the role of nation-building in changing the (coordination) technology rather than altering the preferences and indoctrinating the citizens. We define state capacity with its role in lowering the cost of redistribution and show how investments in nation-building can incentivize the Elite to further invest in state-building. Nation-State building is thus embodiment of this complementarity.
Political Connections and Firm Performance in Indonesia: Evidence from a Novel Dataset on Political Connections (with Addisu Lashitew, Rizal Shidiq and Eric Werker)
Abstract.
This paper examines the relationship between political connections and firm performance in Indonesia, utilizing a unique longitudinal dataset that tracks the vast network of connections between public firms and active politicians. We go beyond simply identifying connections to quantifying their strength and type, employing different definitions that capture formal and informal ties, as well as party affiliation and power dynamics. Our analysis focuses on the period from 2001 to 2019, encompassing multiple election cycles and changes in government. We find that connections to parties in power are particularly impactful, especially for accessing debt financing. Firms connected to the ruling coalition exhibit higher debt-to-equity ratios compared to their unconnected counterparts, suggesting preferential treatment in credit markets. Notably, this effect is more pronounced for connections to the Indonesian Democratic Party of Struggle (PDIP) and the Golkar Party (PGK), highlighting the importance of party-specific influence.
To address the threat of selection bias, we employ a Difference-in-Differences (DiD) approach with firm and time fixed effects, interacting political connections with unexpected election outcomes to make the changes in power dynamics quasi-exogenous. We further strengthen our identification strategy by instrumenting for political connections using industry-level measures of political engagement. This approach leverages exogenous variation in connection patterns across industries to mitigate concerns about unobserved firm-specific factors driving the results. Our findings contribute to the understanding of how political connections operate in emerging markets, underscoring the importance of accounting for both the nature and the political context of these relationships when assessing their impact on firm performance.