Democratization, leader education and growth: firm-level evidence from Indonesia
New paper titled "Democratization, leader education and growth: firm-level evidence from Indonesia" by Paul Pelzl and Steven Poelhekke has been published in Journal of Economic Growth in February 2023.
Does the economic success of democratization depend on newly elected leaders’ characteristics? We exploit the unique Indonesian democratization process, where districts exogenously democratized in different years. In a census of manufacturing plants, employment drops by 5% in districts that elect a non-college educated mayor, while employment stays constant under college graduates. Non-college educated mayors substantially raise taxation but provide less infrastructure, do not spend more on social programs, and are more often involved in corruption cases. Other leader attributes and district characteristics, as well as tests for pre-treatment trends, for selection on unobservables, and for close elections do not explain away the important role of leaders’ education in shaping local policies and growth.