Hometown Favoritism in an Authoritarian Regime - Sciences Po
Hometown Favoritism in an Authoritarian Regime - Sciences Po
Hometown Favoritism in an Authoritarian Regime - Sciences Po
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Electoral motives need not be the only expl<strong>an</strong>ation for favoritism. <strong>Po</strong>litical leaders may favorcerta<strong>in</strong> groups for non-vote political support. At crucial times, political support from politicallyactive groups c<strong>an</strong> help <strong>in</strong>fluence public op<strong>in</strong>ion, mobilize mass protests or mitigate political conflict.<strong>Po</strong>litici<strong>an</strong>s may also distribute favors to certa<strong>in</strong> groups due to their ideological beliefs or personalpreferences. In democratic countries, it is difficult to study those motives separately, because of theircoexistence <strong>in</strong> most situations. Study<strong>in</strong>g favoritism <strong>in</strong> <strong>an</strong> authoritari<strong>an</strong> context, where votes do notmatter, allows us to better dist<strong>in</strong>guish between motives.In authoritari<strong>an</strong> regimes, <strong>an</strong>ecdotal examples abound of the excessive favors that dictatorsbestow on their hometowns. Sirte was a small <strong>an</strong>d unknown village <strong>in</strong> Libya until the early 1970swhen it suddenly received the massive government <strong>in</strong>vestments that turned it <strong>in</strong>to a proper city. In1988, the Liby<strong>an</strong> parliament <strong>an</strong>d most government departments were even relocated from Tripoli toSirte. This special treatment was a surprise to no one: the town is the birthplace of Colonel Gaddafi,Libya’s autocrat from 1969 until recently. In a similar ve<strong>in</strong>, Félix Houphouët-Boigny, the dictatorialpresident of the Côte d’Ivoire from 1960 until his death <strong>in</strong> 1993, moved the official capital city fromAbidj<strong>an</strong> to the ten-times smaller town of Yamoussoukro <strong>in</strong> 1983, his birthplace. The new capitalreceived massive public <strong>in</strong>vestments, <strong>in</strong>clud<strong>in</strong>g the completion <strong>in</strong> 1989 of the $300-million Basilicaof Our Lady of Peace of Yamoussoukro, constructed on <strong>an</strong> area even larger th<strong>an</strong> St. Peter’s Basilica<strong>in</strong> Vatic<strong>an</strong> City.Beyond <strong>an</strong>ecdotes such as these, favoritism <strong>in</strong> authoritari<strong>an</strong> regimes has been shown mostsystematically as ethnic favoritism. Recent studies by Burgess et al. (2011) <strong>an</strong>d Kramon <strong>an</strong>d <strong>Po</strong>sner(2012) provide empirical evidence of favoritism towards common ethnic groups by top autocrats <strong>in</strong>Kenya. Under nondemocratic <strong>in</strong>stitutions, Keny<strong>an</strong> presidents directed public resourcesdisproportionately towards their ethnic groups to build roads (Burgess et al 2011) <strong>an</strong>d improveeducation (Kramon <strong>an</strong>d <strong>Po</strong>sner 2012). When the country became more democratic, road4
construction favoritism disappeared, while education favoritism rema<strong>in</strong>ed equally prevalent. In asimilar ve<strong>in</strong>, Fr<strong>an</strong>ck <strong>an</strong>d Ra<strong>in</strong>er (2012) f<strong>in</strong>d that authoritari<strong>an</strong>ism aggravates ethnic favoritism. Inother studies suggestive of favoritism <strong>in</strong> autocracies, Persson <strong>an</strong>d Zhuravskaya (2009) report morepublic good provision <strong>in</strong> Ch<strong>in</strong>ese prov<strong>in</strong>ces when prov<strong>in</strong>cial leaders build their careers with<strong>in</strong> theprov<strong>in</strong>ce, <strong>an</strong>d Markussen <strong>an</strong>d Tarp (2011) show that l<strong>an</strong>d improvement <strong>in</strong>vestments <strong>in</strong> Vietnam<strong>in</strong>crease for households that self-report their connections to officials.The literature thus far does not dist<strong>in</strong>guish whether autocrats favor their connected groupsfor non-vote political support <strong>in</strong> the case of violent conflicts (as suggested by Padro-i-Miquel 2007<strong>an</strong>d Burgess et al 2011) or due to personal preferences. The question is: is favoritism rooted <strong>in</strong>autocrats’ evaluations of their political survival, or <strong>in</strong> their <strong>in</strong>tr<strong>in</strong>sic utility function? Dur<strong>in</strong>g therecent revolution <strong>in</strong> Libya, Sirte’s role as the last l<strong>in</strong>e of defense for Colonel Gaddafi demonstratesthat the former motive c<strong>an</strong> be as import<strong>an</strong>t as the latter. These two motives are often ent<strong>an</strong>gled,especially when top leaders <strong>in</strong> authoritari<strong>an</strong> regimes gr<strong>an</strong>t favors to a sizeable group with strongpolitical potential, such as entire ethnic groups or large prov<strong>in</strong>ces.To separate the social-preference motive from the non-vote political support motive, we c<strong>an</strong>employ two empirical strategies. First, we c<strong>an</strong> <strong>an</strong>alyze favors bestowed on politically <strong>in</strong>signific<strong>an</strong>tgroups who are not able to mobilize signific<strong>an</strong>t non-vote support for <strong>an</strong> official <strong>in</strong> <strong>an</strong> authoritari<strong>an</strong>regime. Second, we c<strong>an</strong> look for favoritism exercised by lower-level officials whose politicalpromotions depend solely on their superiors’ decisions <strong>an</strong>d whose political survival has no relationto the recipients of favors (say, as supporters <strong>in</strong> <strong>an</strong> armed conflict.) The comb<strong>in</strong>ation of bothstrategies would best highlight the social-preference motive. This approach requires <strong>an</strong> extensivedataset cover<strong>in</strong>g a wide r<strong>an</strong>ge of officials, detailed allocation of public resources to small groups <strong>an</strong>da reliable measure of connection between officials <strong>an</strong>d beneficiaries.5
Vietnam provides a unique opportunity for that purpose. A s<strong>in</strong>gle party, the CommunistParty of Vietnam (CPV), has ruled the country s<strong>in</strong>ce its unification <strong>in</strong> 1975. The rul<strong>in</strong>g party selects,controls <strong>an</strong>d appo<strong>in</strong>ts positions <strong>in</strong> practically all political, executive <strong>an</strong>d legislative bodies, <strong>in</strong>clud<strong>in</strong>gits powerful leadership <strong>in</strong> the <strong>Po</strong>litburo <strong>an</strong>d its Central Committee, as well as the government <strong>an</strong>d80% of the National Assembly. The judiciary br<strong>an</strong>ch is weak, <strong>an</strong>d the People’s Supreme Court’sChief Justice is considered a member of the cab<strong>in</strong>et. In the selection process for political <strong>an</strong>dexecutive bodies, decision power lies mostly with the <strong>Po</strong>litburo <strong>an</strong>d the CPV’s Central Committee,while popular support barely plays <strong>an</strong>y role. While the National Assembly is elected by popular vote,the c<strong>an</strong>didate selection process is under tight scrut<strong>in</strong>y by the CPV, <strong>an</strong>d the election is <strong>in</strong> truth moreof a non-b<strong>in</strong>d<strong>in</strong>g approval vote on the government (Malesky <strong>an</strong>d Schuler 2009). In this context,government officials are mostly accountable to the selectorate with<strong>in</strong> the Party <strong>an</strong>d are <strong>in</strong>sulatedfrom the population.The commune is lowest adm<strong>in</strong>istrative level <strong>in</strong> Vietnam. There are more th<strong>an</strong> eleventhous<strong>an</strong>d communes <strong>in</strong> the country, <strong>an</strong>d each is home to only a few thous<strong>an</strong>d people on average.Given their t<strong>in</strong>y size, no s<strong>in</strong>gle commune c<strong>an</strong> harness <strong>an</strong>y signific<strong>an</strong>t level of political or popularsupport for a r<strong>an</strong>k<strong>in</strong>g official <strong>in</strong> prov<strong>in</strong>cial or national government. Because communes play no role<strong>in</strong> the political selection process, exist<strong>in</strong>g theories of clientelism would not predict politicallymotivated favoritism on the part of officials. Therefore, the Vietnamese context of officials’ homecommunes provides <strong>an</strong> ideal sett<strong>in</strong>g for elim<strong>in</strong>at<strong>in</strong>g concerns about strategic political behavior,lead<strong>in</strong>g to <strong>an</strong> the <strong>in</strong>terpretation of favor as rooted <strong>in</strong> social preferences.Infrastructure is a particularly import<strong>an</strong>t area of public spend<strong>in</strong>g that deserves exam<strong>in</strong>ation.Research suggests that a 10% <strong>in</strong>crease <strong>in</strong> <strong>in</strong>frastructure <strong>in</strong>vestment <strong>in</strong>creases regional <strong>in</strong>come by 1 to1.5% <strong>in</strong> the long run (Shioji 2001). In develop<strong>in</strong>g countries, it has been estimated that about 30% ofeconomic growth is attributed to <strong>in</strong>frastructure improvement (Calderon et al 2011). In poorer6
countries such as <strong>in</strong> Africa, <strong>in</strong>frastructure c<strong>an</strong> contribute to more th<strong>an</strong> half of total growth(K<strong>in</strong>gombe 2011). The United Nations regards <strong>in</strong>frastructure as one of the most import<strong>an</strong>tfoundations for achiev<strong>in</strong>g its Millennium Development Goals. However, build<strong>in</strong>g <strong>an</strong>d ma<strong>in</strong>ta<strong>in</strong><strong>in</strong>gthis foundation for development is also expensive. Africa c<strong>an</strong> only <strong>in</strong>vest about 5% of its <strong>in</strong>come <strong>in</strong><strong>in</strong>frastructure. Fast-grow<strong>in</strong>g Vietnam <strong>an</strong>d Ch<strong>in</strong>a, on the other h<strong>an</strong>d, <strong>in</strong>vest nearly 10% of theirnational <strong>in</strong>comes <strong>in</strong> this critical foundation (Sahoo 2012).In Vietnamese culture, a hometown, def<strong>in</strong>ed as the patril<strong>in</strong>eal town of orig<strong>in</strong>, is a signific<strong>an</strong>tpart of each person’s identity, as it represents the traditional geographical root of a person’spatriarchal family. A hometown accounts for a person’s patril<strong>in</strong>eage, <strong>in</strong> m<strong>an</strong>y cases up to hundredsof years <strong>in</strong> genealogical records. Bonds c<strong>an</strong> exist among relatives from the same hometown even ifthey are genealogically four or five generations remote from one <strong>an</strong>other. On the other h<strong>an</strong>d,hometowns play no signific<strong>an</strong>t political role <strong>in</strong> a politici<strong>an</strong>’s career. A politici<strong>an</strong>’s family might havealready moved away before he was born, 3 or at some po<strong>in</strong>t dur<strong>in</strong>g wartime prior to 1975. If not, thepolitici<strong>an</strong> still must have moved away as soon as he ascended to <strong>an</strong>y position at the prov<strong>in</strong>cial levelor higher, s<strong>in</strong>ce we only consider hometowns <strong>in</strong> rural area. Therefore, <strong>an</strong>y affiliation betweenofficials <strong>an</strong>d hometowns orig<strong>in</strong>ates mostly from Vietnamese cultural <strong>an</strong>d social norms. Such normsare captured by the old say<strong>in</strong>g, “one person becomes a m<strong>an</strong>dar<strong>in</strong>, his whole cl<strong>an</strong> benefits.”Such favoritism is usually the fruit of comb<strong>in</strong>ed efforts on the part of both officials <strong>an</strong>d localofficers. Typically, a commune leader from a newly promoted official’s hometown starts the processby suggest<strong>in</strong>g to the official certa<strong>in</strong> projects from which the hometown could benefit, usually <strong>in</strong> theform of <strong>in</strong>frastructure construction. In most cases, these projects are not at all under the official’sauthority. Nevertheless, the official c<strong>an</strong> use his political capital to <strong>in</strong>tervene <strong>in</strong> decisions on thecommune’s budget <strong>an</strong>d project fund<strong>in</strong>g, possibly by mak<strong>in</strong>g deals with appropriate authorities, <strong>an</strong>d3 Purely for expositional convenience, we refer to r<strong>an</strong>k<strong>in</strong>g officials as males.7
eventually get the project for his hometown. Due to the large amount of public <strong>in</strong>vestment <strong>in</strong><strong>in</strong>frastructure at all levels dur<strong>in</strong>g the last decade, this mech<strong>an</strong>ism of giv<strong>in</strong>g <strong>an</strong>d obta<strong>in</strong><strong>in</strong>g favors forhometowns has become ramp<strong>an</strong>t.In this empirical project, we first collect data on all officials <strong>in</strong> r<strong>an</strong>k<strong>in</strong>g office dur<strong>in</strong>g theperiod 2000-2010. R<strong>an</strong>k<strong>in</strong>g officials <strong>in</strong>clude all members of the Party Central Committee, allgovernment positions of the deputy m<strong>in</strong>ister r<strong>an</strong>k <strong>an</strong>d above, all prov<strong>in</strong>cial leaders <strong>an</strong>d all membersof the legislative National Assembly. We then match their hometowns to <strong>in</strong>frastructure data oncommunes, the lowest official adm<strong>in</strong>istrative unit, as surveyed by the Vietnam Household Liv<strong>in</strong>gSt<strong>an</strong>dards Survey (VHLSS, a World B<strong>an</strong>k-led survey project <strong>in</strong> Vietnam <strong>an</strong>d part of the WorldB<strong>an</strong>k’s Liv<strong>in</strong>g St<strong>an</strong>dards Measurement Surveys).To estimate the effect of officials’ promotions on <strong>in</strong>frastructure <strong>in</strong> their hometowns, weneed to address a key challenge: political promotions of officials c<strong>an</strong> be endogenous. In particular,powerful prov<strong>in</strong>ces may have better <strong>in</strong>frastructure <strong>an</strong>d at the same time they c<strong>an</strong> get morepromotions for their officials <strong>in</strong> the Central Government. To deal with this <strong>an</strong>d other endogeneities,we employ a fixed-effect strategy, which <strong>in</strong>cludes commune-official pair-fixed effects <strong>an</strong>d yeardummies to elim<strong>in</strong>ate time-<strong>in</strong>vari<strong>an</strong>t omitted variables. Further, we run placebo tests for the effectof officials’ promotions on communes neighbor<strong>in</strong>g their hometowns to ensure that there is noevidence for time-vari<strong>an</strong>t omitted variables <strong>an</strong>d reverse causation.Us<strong>in</strong>g this strategy, we f<strong>in</strong>d strong evidence of favors addressed to officials’ hometownsacross several types of <strong>in</strong>frastructure, most notably road access to villages <strong>an</strong>d marketplaceconstruction. Promotions also <strong>in</strong>crease the ch<strong>an</strong>ces that a commune will benefit from the State’ssupport for poor communes, through a program supposed to select communes purely based ontheir level of hardship.8
The distribution of this favoritism reveals the power structure with<strong>in</strong> <strong>an</strong> authoritari<strong>an</strong>regime, a topic often considered a black box to outsiders. Contrary to pork-barrel politics <strong>in</strong>democracies, we f<strong>in</strong>d that members of the legislative National Assembly do not have much <strong>in</strong>fluenceon their hometowns’ budget, despite their formal budgetary authority. On the other h<strong>an</strong>d, favoritismis pervasive among executive officials, who do not have formal budgetary authority. The effect isstronger when the age of the hometown’s commune chair is closer to the official’s age, <strong>an</strong>d wherethe prov<strong>in</strong>cial <strong>in</strong>stitutional environment allows for more discretionary policies. These f<strong>in</strong>d<strong>in</strong>gssuggest that favoritism works through <strong>in</strong>formal ch<strong>an</strong>nels based on specific forms of political power<strong>an</strong>d <strong>in</strong>stitutional sett<strong>in</strong>gs.Given the top-down nature of political promotions, officials arguably do not help theircommunes <strong>in</strong> exch<strong>an</strong>ge for political support. In our <strong>an</strong>alysis, favoritism is detected only for homecommunes <strong>an</strong>d not for larger home districts, while even the latter is still too small a geographicalunit to provide <strong>an</strong>y signific<strong>an</strong>t political support. This pattern suggests that the ma<strong>in</strong> motive offavoritism is a form of social preference directed towards each official’s hometown.This f<strong>in</strong>d<strong>in</strong>g also provides real-world evidence of directed altruism that goes beyond controlledexperiments us<strong>in</strong>g dictator games (Leider et al 2009, draw<strong>in</strong>g from Williams’s (1966) <strong>an</strong>d Dawk<strong>in</strong>s’s(1976) ideas on the selfish gene.) It suggests that officials f<strong>in</strong>d <strong>in</strong>tr<strong>in</strong>sic utility <strong>in</strong> provid<strong>in</strong>g additionalconsumption <strong>an</strong>d wealth to a group of social relatives def<strong>in</strong>ed by common or proximate socialcharacteristics, e.g. those com<strong>in</strong>g from the same greater family or the same cl<strong>an</strong>; shar<strong>in</strong>g the samecaste, race, gender or religion; orig<strong>in</strong>at<strong>in</strong>g from the same geographical region or hav<strong>in</strong>g similar social<strong>an</strong>d class status.The paper is org<strong>an</strong>ized as follows. Sections 2 to 6 present the political background ofVietnam <strong>an</strong>d the conceptual framework, data description, methodology <strong>an</strong>d empirical results,respectively. The last section discusses the results <strong>an</strong>d concludes.9
2. Context of the Study2.1 <strong>Po</strong>litical backgroundThe Constitution of the Socialist Republic of Vietnam states that, “the Communist Party ofVietnam… is the lead<strong>in</strong>g force of the State <strong>an</strong>d the Society.” In practice, the Communist Party ofVietnam (CPV) has held a monopoly of power s<strong>in</strong>ce Vietnam’s reunification <strong>in</strong> 1976. CPV membersaccount for less th<strong>an</strong> 4% of the population. In the Vietnamese political structure, the three mostimport<strong>an</strong>t bodies (by the order of actual power) are the CPV, the Government, <strong>an</strong>d the NationalAssembly. The CPV is headed by a General Secretary, <strong>an</strong>d its leadership <strong>in</strong>cludes a 15-member<strong>Po</strong>litburo <strong>an</strong>d a 150-member Central Committee. These are the most powerful people <strong>an</strong>d decisionmak<strong>in</strong>gentities <strong>in</strong> Vietnam; they are <strong>in</strong> charge of mak<strong>in</strong>g key personnel <strong>an</strong>d strategic decisions forthe country.The Government, headed by a Prime M<strong>in</strong>ister <strong>an</strong>d several Deputy Prime M<strong>in</strong>isters, is theexecutive br<strong>an</strong>ch of the state. Functionally, the Government consists of more th<strong>an</strong> 30 m<strong>in</strong>istries <strong>an</strong>dm<strong>in</strong>istry-level agencies. The cab<strong>in</strong>et <strong>in</strong>cludes the State B<strong>an</strong>k’s Governor, the Chief Justice of theSupreme People’s Court <strong>an</strong>d the Prosecutor General of the Supreme People’s Procuracy. 4Geographically, the Government <strong>in</strong>cludes 64 prov<strong>in</strong>cial authorities called Prov<strong>in</strong>cial People’sCommittees. Local authorities are considered br<strong>an</strong>ches of the Central Government. There are threelevels of the local authorities: prov<strong>in</strong>cial, district <strong>an</strong>d commune. The lower-level People’sCommittees report to the higher-level People’s Committees.The National Assembly is the legislative br<strong>an</strong>ch of the state. It consists of roughly 500delegates elected from electoral districts based <strong>in</strong> the 64 prov<strong>in</strong>ces. The CPV closely controls thenom<strong>in</strong>ation <strong>an</strong>d election process for the National Assembly (Malesky <strong>an</strong>d Schuler 2009). About 80%of the delegates are members of the CPV. Although the de facto power of the National Assembly4 The judiciary <strong>in</strong> Vietnam has limited power <strong>an</strong>d depends heavily on the Government <strong>an</strong>d CPV.10
has been exp<strong>an</strong>ded <strong>in</strong> recent years, it is very limited compared to that of the CPV <strong>an</strong>d theGovernment. All laws <strong>an</strong>d budget decisions are prepared by the Government before they are sent tothe National Assembly for discussion <strong>an</strong>d ratification.As <strong>in</strong> other authoritari<strong>an</strong> regimes, the rul<strong>in</strong>g party selects, appo<strong>in</strong>ts, <strong>an</strong>d <strong>in</strong>fluences the fill<strong>in</strong>gof all government <strong>an</strong>d political positions, <strong>in</strong>clud<strong>in</strong>g those <strong>in</strong> the three bodies discussed above. Thenom<strong>in</strong>al process is supposed to work as follows. In election years CPV members meet <strong>in</strong> the PartyCongress <strong>an</strong>d select the Central Committee, which then selects the <strong>Po</strong>litburo <strong>an</strong>d r<strong>an</strong>k<strong>in</strong>g positionsbased on lists of c<strong>an</strong>didates recommended by the <strong>in</strong>cumbent <strong>Po</strong>litburo <strong>an</strong>d Central Committee. TheCPV then nom<strong>in</strong>ates c<strong>an</strong>didates for the National Assembly, <strong>in</strong>clud<strong>in</strong>g r<strong>an</strong>k<strong>in</strong>g positions <strong>in</strong> theNational Assembly, <strong>an</strong>d citizens vote among these c<strong>an</strong>didates. After that, elected delegates of theNational Assembly, 80% of whom are CPV members, vote to approve the Prime M<strong>in</strong>ister <strong>an</strong>dCab<strong>in</strong>et Members nom<strong>in</strong>ated by the CPV <strong>in</strong> a s<strong>in</strong>gle, uncontested list. F<strong>in</strong>ally, the Prime M<strong>in</strong>ister<strong>an</strong>d Cab<strong>in</strong>et Members appo<strong>in</strong>t all other positions <strong>in</strong> the Government. In practice, the CPV closelycontrols the selection of c<strong>an</strong>didates, the communication between c<strong>an</strong>didates <strong>an</strong>d constituents, theelection locations <strong>an</strong>d procedure, <strong>an</strong>d the count<strong>in</strong>g of the votes. The CPV’s Central Committeeeffectively decides who fills r<strong>an</strong>k<strong>in</strong>g positions <strong>in</strong> the Central <strong>an</strong>d Prov<strong>in</strong>cial Governments <strong>an</strong>d <strong>in</strong> theNational Assembly. Malesky <strong>an</strong>d Schuler (2009) document the CPV’s controll<strong>in</strong>g practices <strong>in</strong>elections <strong>in</strong> Vietnam.Under Vietnam’s s<strong>in</strong>gle-party rule, there is little separation between the State <strong>an</strong>d the CPV,<strong>an</strong>d thus little dist<strong>in</strong>ction between politici<strong>an</strong>s <strong>an</strong>d bureaucrats. In practice, start<strong>in</strong>g from very lowr<strong>an</strong>ks, such as the heads of communes, officials <strong>in</strong> the Government need to be members of the CPVjn order to hold office <strong>an</strong>d get promotions. The career ladder <strong>in</strong> the Government starts from theentry level <strong>an</strong>d ends at the highest level of Prime M<strong>in</strong>ister without a threshold that dist<strong>in</strong>guishes11
ureaucrats from politici<strong>an</strong>s. R<strong>an</strong>k<strong>in</strong>g members of the CPV <strong>an</strong>d elected delegates of the NationalAssembly receive their salaries from the same system <strong>an</strong>d source as do government bureaucrats.For this study, it is also useful to underst<strong>an</strong>d the ways <strong>in</strong> which Vietnamese governmentofficials may direct public <strong>in</strong>vestments <strong>in</strong> <strong>in</strong>frastructure toward their preferred communes. Subject tothe level of fund<strong>in</strong>g required, the decision to build a commune road, school, cl<strong>in</strong>ic, k<strong>in</strong>dergarten ormarket is usually made <strong>in</strong> different stages by prov<strong>in</strong>cial, district <strong>an</strong>d then commune officials. Theseare the officials who c<strong>an</strong> directly favor projects for certa<strong>in</strong> communes. Officials at the central level,such as members of the Central Committee of the CPV, of the Government Cab<strong>in</strong>et or of theNational Assembly, usually do not have the formal, hierarchical authority to make decisions on local<strong>in</strong>frastructure. They must exercise their personal <strong>in</strong>fluence on local officials, who have the authority<strong>in</strong> this matter, <strong>in</strong> order to obta<strong>in</strong> government projects for their preferred communes. The onlyexception to this is Program 135, the State's "poor commune support program" which aims topromote the development of especially difficult communes by, among other th<strong>in</strong>gs, <strong>in</strong>vest<strong>in</strong>g <strong>in</strong>commune <strong>in</strong>frastructure. The selection of "‘especially difficult communes"’ is made by the CentralGovernment under the advice of a jo<strong>in</strong>t committee of several related m<strong>in</strong>istries.Dur<strong>in</strong>g the study period, Vietnam experienced signific<strong>an</strong>t economic growth accomp<strong>an</strong>ied bya drastic reduction <strong>in</strong> poverty. GDP <strong>in</strong> real terms <strong>in</strong>creased 6.5% per year on average from 2001 to2010. The percentage of people liv<strong>in</strong>g on less th<strong>an</strong> two dollars (PPP) per day fell from 68.7% <strong>in</strong>2002 to 38.5% <strong>in</strong> 2008. 5 The government’s budget, while always <strong>in</strong> deficit, was strongly supportedby the grow<strong>in</strong>g economy, strong exports (particularly the <strong>in</strong>creas<strong>in</strong>g world prices of exported crudeoil) <strong>an</strong>d development aids. Consequently, the government exp<strong>an</strong>ded all forms of <strong>in</strong>frastructureconstruction, <strong>in</strong>clud<strong>in</strong>g <strong>in</strong> particular those <strong>in</strong> communes <strong>an</strong>d districts, <strong>an</strong> attempt widely seen as a5 World B<strong>an</strong>k, World Data B<strong>an</strong>k, accessed August 8, 201112
key way of alleviat<strong>in</strong>g poverty <strong>in</strong> the country. This period therefore held particular <strong>in</strong>terest for astudy of the determ<strong>in</strong><strong>an</strong>ts of <strong>in</strong>frastructure improvements <strong>in</strong> rural Vietnam.2.2 Cultural <strong>an</strong>d social backgroundCulture is known as <strong>an</strong> import<strong>an</strong>t <strong>in</strong>formal <strong>in</strong>stitution that s<strong>an</strong>ctions political <strong>an</strong>d economicbehaviors (Helmke <strong>an</strong>d Levitsky 2003, Tabell<strong>in</strong>i 2010). The phenomenon of strong connectionsamong extended families is a cultural norm not unique to Vietnam. The import<strong>an</strong>ce of k<strong>in</strong>shipnetworks <strong>in</strong> both traditional <strong>an</strong>d post-traditional societies has been long studied <strong>in</strong>ter alia byRadcliffe-Brown (1922), Gluckm<strong>an</strong> (1955) <strong>an</strong>d Mitchell (1965). The diverse ways <strong>in</strong> which thesenetworks exhibit <strong>an</strong>d operate across different societies have attracted more recent studies. Forexample, Angelucci et al. (2007, 2012) have stressed the import<strong>an</strong>ce to <strong>in</strong>formal <strong>in</strong>sur<strong>an</strong>ce of socialnetworks based on the extended family <strong>in</strong> rural Mexico. The literature on social networks alsoidentifies family l<strong>in</strong>ks as a key factor <strong>in</strong> job searches (see Io<strong>an</strong>nides <strong>an</strong>d Loury’s 2004 review).In our context, the family l<strong>in</strong>ks m<strong>an</strong>ifest <strong>in</strong> the form of connections to a hometown are astrong po<strong>in</strong>t of reference <strong>in</strong> Vietnamese culture. The Vietnamese population is relativelyhomogenous. The K<strong>in</strong>h (orig<strong>in</strong>al Vietnamese) account for 86% of the population, 6 <strong>an</strong>d they alsocontrol most import<strong>an</strong>t political positions. In their traditionally heavily patriarchal society, which isrooted <strong>in</strong> a long history of Confuci<strong>an</strong> <strong>in</strong>fluences <strong>an</strong>d a cult of <strong>an</strong>cestral worship, Vietnamese socialnorms put particular emphasis on patril<strong>in</strong>eal l<strong>in</strong>ks <strong>in</strong> the family <strong>an</strong>d society (Hunt 2002). S<strong>in</strong>ceConfucius, filial virtues, mostly def<strong>in</strong>ed with<strong>in</strong> a patriarchal family, have been considered thebuild<strong>in</strong>g blocks of a stable society. Therefore, all l<strong>in</strong>ks based on common patriarchal roots are sacred<strong>an</strong>d comm<strong>an</strong>d great respect. It is quite common to observe large lo<strong>an</strong>s <strong>an</strong>d tr<strong>an</strong>sfers with<strong>in</strong> theextended patril<strong>in</strong>eal family, <strong>an</strong>d especially contributions towards “public goods” such as religious6 Authors’ calculation from 2009 <strong>Po</strong>pulation Census’s data.13
ceremonies <strong>an</strong>d <strong>an</strong>cestral temples that help glorify common patril<strong>in</strong>eal <strong>an</strong>cestors. Those norms alsoexpla<strong>in</strong> the strong preference for sons as opposed to daughters <strong>in</strong> Vietnamese society.Therefore, one’s hometown, def<strong>in</strong>ed as the orig<strong>in</strong> of a person’s patril<strong>in</strong>eal cl<strong>an</strong>, is trulyimport<strong>an</strong>t to most Vietnamese. It highlights a person’s connection to his or her extended patril<strong>in</strong>ealfamily, composed of all those who share one’s patril<strong>in</strong>eal <strong>an</strong>cestors (Nguyen <strong>an</strong>d Healy 2006). Bondsare easily forged among people of common hometown even if they are genealogically m<strong>an</strong>ygenerations remote from each other. <strong>Hometown</strong>s are so import<strong>an</strong>t that this <strong>in</strong>formation figures <strong>in</strong>all Vietnamese national identity cards, while there is no <strong>in</strong>formation on place of birth.Under traditional Vietnamese Confuci<strong>an</strong> culture, government officials resemble thesuccessful m<strong>an</strong>dar<strong>in</strong>s of the old days. Historically, the selection, promotion <strong>an</strong>d ascent to power ofm<strong>an</strong>dar<strong>in</strong>s were heralded with major celebrations <strong>in</strong> their hometowns. Once selected, m<strong>an</strong>dar<strong>in</strong>swould usually try to direct favors to their hometowns <strong>in</strong> acknowledgment of the benevolentbless<strong>in</strong>gs they must have received from their <strong>an</strong>cestors, <strong>an</strong>d <strong>in</strong> susta<strong>in</strong><strong>in</strong>g the tradition of filialvirtues. Anecdotal evidence po<strong>in</strong>ts out that these practices are still very common today.The Vietnamese context thus opens the door to our study of the role of officials’ socialpreferences towards their hometowns. The connections between <strong>in</strong>dividuals <strong>an</strong>d their hometownsare prevalent <strong>an</strong>d import<strong>an</strong>t accord<strong>in</strong>g to the exist<strong>in</strong>g social norms. They are also dist<strong>in</strong>ct frompolitical motivations, s<strong>in</strong>ce hometowns are of negligible political import<strong>an</strong>ce. Moreover, because ofthe long wars <strong>in</strong> Vietnam, most current key officials must have either been born far away from theirhometown, or have moved away at a young age as part of waves of war refugee migr<strong>an</strong>ts <strong>in</strong> both theNorth <strong>an</strong>d the South; they also must be at present based <strong>in</strong> a large city away from their ruralhometowns. Therefore, officials’ l<strong>in</strong>ks with their hometowns are mostly based on cultural <strong>an</strong>d socialfactors.14
3. A simple conceptual frameworkExist<strong>in</strong>g economic theory has <strong>an</strong>alyzed favoritism <strong>in</strong> auctions (Laffont <strong>an</strong>d Tirole 1989, Burguet <strong>an</strong>dPerry 2007, Lee 2008, Arozamenaa <strong>an</strong>d We<strong>in</strong>schelbaumb 2011), <strong>in</strong> the labor market (PrendergastTopel 1996, Miguel A. Dur<strong>an</strong> <strong>an</strong>d Morales 2011) <strong>an</strong>d <strong>in</strong> queu<strong>in</strong>g for public resources (Batabyal <strong>an</strong>dBeladi 2008). Ethnicity (Burgess et al 2011), gender (Abrevaya <strong>an</strong>d Hamermesh 2012) <strong>an</strong>d socialpressure (Garic<strong>an</strong>o, Palacios <strong>an</strong>d Prendergast 2005) have been considered as bases for favoritism. Inthis section, we present a simple model to illustrate how hometown-based favoritism works, <strong>an</strong>dpredict how officials’ power <strong>an</strong>d motives shape the outcomes of this type of favoritism.The model <strong>in</strong>volves a sequential game between two utility-maximiz<strong>in</strong>g agents, the Official<strong>an</strong>d the Budget Allocator. 7 The Official corresponds to newly promoted officials with special l<strong>in</strong>ksto their place of orig<strong>in</strong>. The Allocator refers to the government unit that has authority over budgetallocations to communes. The Official cares about gett<strong>in</strong>g additional resource allocation for hiscommune, which often comes <strong>in</strong> the form of additional budget <strong>in</strong>frastructure projects such as roads,markets, schools <strong>an</strong>d cl<strong>in</strong>ics. These additional resources c<strong>an</strong> benefit the Official <strong>in</strong> two ways: byprovid<strong>in</strong>g him with additional political support from his home commune/district, as observed <strong>in</strong> thecase of pork-barrel politics, <strong>an</strong>d by appeal<strong>in</strong>g to his “altruistic” preference to improve the welfare ofhis commune/district of orig<strong>in</strong> <strong>an</strong>d his remote relatives liv<strong>in</strong>g there. This altruistic preference isunderstood as <strong>an</strong> <strong>in</strong>herent cultural trait. Let λ denote the adm<strong>in</strong>istrative level of the place of birth. λc<strong>an</strong> be commune, district or prov<strong>in</strong>ce. A higher λ me<strong>an</strong>s a larger adm<strong>in</strong>istrative level, with morepotential to provide political support but less social affection from the Official. The model allowsfor the comparison of different λ’s (commune versus district) to ga<strong>in</strong> <strong>in</strong>sight <strong>in</strong>to the Official’smotivation.7 For expositional convenience, we refer to the official as male <strong>an</strong>d the local authority as female.15
To achieve his objective, the Official has to work out a deal with the Allocator, who hasdirect control over budget allocation. The Official c<strong>an</strong> give the Allocator certa<strong>in</strong> favors, such aspolitical promotion, that enh<strong>an</strong>ce the Allocator’s utility by P, at a cost g for the Official. In return,the Allocator will ch<strong>an</strong>nel <strong>an</strong> additional amount B from the budget to the Official's hometown’s<strong>in</strong>frastructure projects, at a cost h for the Allocator. This favored allocation B is valued by theOfficial at (B,λ) + (B,λ), where represents the utility from additional political support <strong>an</strong>d represents the utility from social preference satisfaction. We pay particular attention to B, as itm<strong>an</strong>ifests explicit evidence of favoritism between the Official <strong>an</strong>d Allocator.We assume that the Official’s cost function g(P,r) is <strong>in</strong>creas<strong>in</strong>g <strong>an</strong>d convex <strong>in</strong> P <strong>an</strong>ddecreas<strong>in</strong>g <strong>in</strong> r, where r represents the Official's power such that higher r implies higher power.Next, the Allocator’s cost function h(B,d) is <strong>in</strong>creas<strong>in</strong>g <strong>an</strong>d convex <strong>in</strong> B <strong>an</strong>d <strong>in</strong>creas<strong>in</strong>g <strong>in</strong> d, where dmeasures <strong>in</strong>stitutional constra<strong>in</strong>ts on the Allocator's discretion. We further assume that (B,λ) <strong>an</strong>d(B,λ) are both <strong>in</strong>creas<strong>in</strong>g <strong>an</strong>d concave <strong>in</strong> B. 8The Official is the first mover <strong>an</strong>d makes <strong>an</strong> offer to the Allocator <strong>in</strong>volv<strong>in</strong>g (P,B). TheAllocator will accept if it satisfies her participation constra<strong>in</strong>t, namely that the benefit of accept<strong>in</strong>g isnot lower th<strong>an</strong> the cost. As the first mover, the Official c<strong>an</strong> fully appropriate the game’s rent bymak<strong>in</strong>g <strong>an</strong> offer such that the Allocator is <strong>in</strong>different as to whether to accept or refuse it. The offerthen solves the follow<strong>in</strong>g maximization problem:Max (P,B) (B,λ) + (B,λ) - g(P, r) s.t. P - h(B,d) 0. (1)8 We assume that the costs of direct monetary tr<strong>an</strong>sfers between the two agents are much higher th<strong>an</strong> the costs ofprovid<strong>in</strong>g favor, so monetary tr<strong>an</strong>sfers, or bribes, are not realistic options. In practice, exch<strong>an</strong>ges of both bribes <strong>an</strong>dfavors may coexist. We refra<strong>in</strong> from model<strong>in</strong>g explicit bribes because it would not add <strong>in</strong>sight to our empirical setup.16
We will now state three propositions about the existence, distribution <strong>an</strong>d motives offavoritism. These propositions provide the basis for the subsequent empirical <strong>in</strong>vestigationpresented <strong>in</strong> this paper.Proposition 1: Assume that (A1): ' B (0,λ) + ' B (0,λ) - g' P (h(0,d),r)h' B (0,d) > 0. There exists aunique solution (P*,B*) to this model, with positive favored allocation B*>0, determ<strong>in</strong>ed by thefollow<strong>in</strong>g equations:' B (B*,λ) + ' B (B*,λ) - g' P (h(B*,d),r)h' B (B*,d) = 0 (2), P* = h(B*,d).Intuitively, this proposition shows that if there is positive net marg<strong>in</strong>al benefit of favoredallocation B at 0, then a positive level of favoritism will occur. As a result, even <strong>in</strong> <strong>an</strong> authoritari<strong>an</strong>regime where the electoral motivation is absent, if the marg<strong>in</strong>al social motivation is sufficiently largethen favoritism will arise. (Proof <strong>in</strong> the Appendix)Proposition 2: (a) Assume that (A2a) the marg<strong>in</strong>al cost g' P is decreas<strong>in</strong>g <strong>in</strong> r, then thefavored allocation B* is <strong>in</strong>creas<strong>in</strong>g <strong>in</strong> r; (b) Assume that (A2b) the marg<strong>in</strong>al cost h' B is <strong>in</strong>creas<strong>in</strong>g <strong>in</strong> d,then the favored allocation B* is decreas<strong>in</strong>g <strong>in</strong> d.Result (a) implies that a higher-powered official c<strong>an</strong> exercise more favoritism for his homecommune. This relation allows us underst<strong>an</strong>d the power structure <strong>in</strong> a political system throughobserv<strong>in</strong>g the favoritism of different officials. Notice that what matters is the cross derivative of gwith respect to P <strong>an</strong>d r, <strong>an</strong>d not the first derivative of g with respect to r. A higher-r<strong>an</strong>ked officialc<strong>an</strong> get a better deal because P <strong>an</strong>d r are complements. Result (b) implies that favoritism is morewidespread when local authorities have more discretionary power to make a deal. (Proof <strong>in</strong> theAppendix)Proposition 3: If the marg<strong>in</strong>al benefits ' B (B,λ) + ' B (B,λ) are <strong>in</strong>creas<strong>in</strong>g (decreas<strong>in</strong>g) <strong>in</strong> λ(A3), then the favored allocation B* is <strong>in</strong>creas<strong>in</strong>g (decreas<strong>in</strong>g) <strong>in</strong> λ.17
This result shows that the effect of adm<strong>in</strong>istrative level λ on the value of favored allocationessentially depends on its effect on the marg<strong>in</strong>al benefits (Proof <strong>in</strong> the Appendix). As discussedpreviously, it is realistic to assume that at a larger adm<strong>in</strong>istrative level, social preferences become lessimport<strong>an</strong>t <strong>an</strong>d political motivation more import<strong>an</strong>t. At a larger level, social connections arguablybecome less frequent or salient, so the improved utility derived from more favored allocation is lessvaluable, i.e. ' B (B,λ) decreases when λ <strong>in</strong>creases. On the other h<strong>an</strong>d, a larger level is more politically<strong>in</strong>fluential, so additional favored allocation c<strong>an</strong> potentially br<strong>in</strong>g more benefit, i.e. ' B (B,λ) <strong>in</strong>creaseswhen λ <strong>in</strong>creases. Overall, our prior on the effect of λ on the total marg<strong>in</strong>al benefit, namely ' B (B,λ)+ ' B (B,λ), depends on whether social preferences or political <strong>in</strong>fluences are more dom<strong>in</strong><strong>an</strong>t.Empirically, evidence that B* is <strong>in</strong>creas<strong>in</strong>g <strong>in</strong> λ is consistent with ' B (B,λ) + ' B (B,λ) be<strong>in</strong>g <strong>in</strong>creas<strong>in</strong>g<strong>in</strong> λ, <strong>in</strong> which case the social preference effect through ' B must have dom<strong>in</strong>ated the politicalmotivation effect through ' B .We c<strong>an</strong> also consider the special case where the Official is the same as the Budget Allocator,political favor exch<strong>an</strong>ge becomes irrelev<strong>an</strong>t <strong>an</strong>d the Official only has to pick B to maximize his netga<strong>in</strong> of (B,λ) + (B,λ) - h(B,d). This problem has a unique solution B* that satisfies ' B (B*,λ) +' B (B*,λ) - h' B (B*,d) = 0 (as ' B (B,λ) <strong>an</strong>d ' B (B,λ) are both decreas<strong>in</strong>g <strong>in</strong> B while h' B (B,d) is<strong>in</strong>creas<strong>in</strong>g). As <strong>in</strong> propositions 2 <strong>an</strong>d 3 above, this unique solution B* <strong>in</strong>creases when d is lower(assum<strong>in</strong>g that h' B is <strong>in</strong>creas<strong>in</strong>g <strong>in</strong> d) <strong>an</strong>d when ' B (B,λ) is higher for every value of B.Propositions 1 to 3 are illustrated <strong>in</strong> Figure 1. Two key functions of the favored allocation B,namely the positive <strong>an</strong>d negative parts <strong>in</strong> equation (2), are represented by a downward slop<strong>in</strong>gmarg<strong>in</strong>al benefit curve ' B (B,λ) + ' B (B,λ) <strong>an</strong>d <strong>an</strong> upward slop<strong>in</strong>g “pseudo-marg<strong>in</strong>al” cost curveg' P (h(B,d),r)h' B (B,d). The two must <strong>in</strong>tersect at the unique solution B*. An <strong>in</strong>crease <strong>in</strong> r or d raises18
the pseudo-marg<strong>in</strong>al cost curve, thus reduc<strong>in</strong>g B* to B 1 . On the other h<strong>an</strong>d, <strong>an</strong> <strong>in</strong>crease <strong>in</strong> eithercom<strong>in</strong>g ' B (B,λ) or ' B (B,λ) pushes the marg<strong>in</strong>al benefit curve up <strong>an</strong>d moves B* to B 2 .[Insert Figure 1 here]This model provides a simple framework for underst<strong>an</strong>d<strong>in</strong>g favoritism under variouspolitical systems, as previously exam<strong>in</strong>ed <strong>in</strong> the exist<strong>in</strong>g scientific <strong>an</strong>d journalistic literatures. In<strong>in</strong>stitutional environments with strong govern<strong>an</strong>ce <strong>an</strong>d high accountability, both g' P (the Official'smarg<strong>in</strong>al cost to gr<strong>an</strong>t political favor) <strong>an</strong>d h' B (the Allocator's marg<strong>in</strong>al cost to distort the localbudget) are prohibitively high. The result<strong>in</strong>g amount of budget distorted by favoritism B* is thenm<strong>in</strong>imal, if at all. This applies to strong democracies as well as non-democratic regimes with a wellfunction<strong>in</strong>gsystem of checks <strong>an</strong>d bal<strong>an</strong>ces on the majority of officials, such as S<strong>in</strong>gapore’s – the lackof political <strong>in</strong>centives <strong>in</strong> those regimes, i.e. low ' B , may further dampen favoritism. In effect, itsuffices to raise either g' P or h' B , i.e. either the accountability of high-r<strong>an</strong>k officials or that of localadm<strong>in</strong>istrative units, to curb B*.The model also shows that while evidence of favoritism from heads of state such as ColonelGaddafi or President Félix Houphouët-Boigny abound, it is unclear whether favoritism iswidespread <strong>in</strong> these contexts. A strong dictator may only tolerate his own favoritism <strong>an</strong>d punish hiscoord<strong>in</strong>ates’; this is a case of g' P =0 for the dictator, but very high for everyone else. In such cases,democratization <strong>an</strong>d/or decentralization could <strong>in</strong>crease ' <strong>an</strong>d lower h' B , both lead<strong>in</strong>g to morewidespread favoritism. For that reason, favoritism may also be found <strong>in</strong> democratic countries, suchas <strong>in</strong> certa<strong>in</strong> cases <strong>in</strong> the U.S. or India where the marg<strong>in</strong>al cost g' P is low.The model’s application to <strong>an</strong> authoritari<strong>an</strong> sett<strong>in</strong>g yields key empirical predictions on theeffects of officials’ promotions on home commune <strong>in</strong>frastructure, a m<strong>an</strong>ifestation of favored budgetallocation. First, because of a lack of checks <strong>an</strong>d bal<strong>an</strong>ces, the marg<strong>in</strong>al costs g' P <strong>an</strong>d h' B are expected19
to be low <strong>in</strong> Vietnam, so the phenomenon of hometown favoritism is predicted to be widespreadamong officials, even beyond the top leaders (Hypothesis I). Second, hometown favoritismdepends positively on the official’s power <strong>in</strong> the authoritari<strong>an</strong> hierarchy <strong>an</strong>d on the home prov<strong>in</strong>ce’sdiscretionary power (Hypothesis II). Third, hometown favoritism is most present where theattachment between the official <strong>an</strong>d the hometown is strongest. We expect that the marg<strong>in</strong>al socialpreference ' B is close to zero for communes aside from the home commune <strong>an</strong>d that ' B for thehome district is diluted to a much lower level th<strong>an</strong> that of the home commune. Therefore,favoritism is predicted to decrease as we move from the home commune to neighbor<strong>in</strong>g communesor to the home district (Hypothesis III). While marg<strong>in</strong>al political <strong>in</strong>terest ' B may be slightly higherat the district level, we do not expect it <strong>in</strong> practice to be of a relev<strong>an</strong>t magnitude (as districts barelymatter <strong>in</strong> Vietnamese politics). The subsequent sections will present the data, empirical strategy <strong>an</strong>dresults of the tests of these three hypotheses.4. The Data4.1 Data collectionAs <strong>in</strong> most authoritari<strong>an</strong> countries, available data on officials <strong>an</strong>d their family backgrounds <strong>in</strong>Vietnam are scarce. Available observations are highly scattered <strong>an</strong>d skewed toward top officials,lead<strong>in</strong>g to potential selection issues. Our question requires data on the full population of r<strong>an</strong>k<strong>in</strong>gofficials, which makes data collection more difficult. From 2009 to 2011, our data collection teamidentified, checked <strong>an</strong>d matched officials from three major sources: the Communist Party’s<strong>in</strong>formation on all members of the <strong>Po</strong>litburo <strong>an</strong>d Central Committee (which is publicly available onits websites), the National Assembly’s (the legislature) <strong>in</strong>formation on all of its members (alsopublicly available on its website) <strong>an</strong>d the Yearbook of Adm<strong>in</strong>istrative Org<strong>an</strong>izations’ <strong>in</strong>formation on20
Central <strong>an</strong>d Prov<strong>in</strong>cial Government officials start<strong>in</strong>g from the r<strong>an</strong>k of deputy m<strong>in</strong>ister (CentralGovernment) <strong>an</strong>d vice chair of Prov<strong>in</strong>cial People’s Committees (Prov<strong>in</strong>cial Government). These areknown as the three major political bodies of Vietnamese politics. These sources cover the periodfrom 2000 to 2010; start <strong>an</strong>d end dates are based on official term dates. In practice, start <strong>an</strong>d enddates that differ from term dates (e.g. <strong>an</strong> early promotion) are unusual. This puts together <strong>an</strong>exhaustive dataset of all r<strong>an</strong>k<strong>in</strong>g political promotions <strong>in</strong> the country dur<strong>in</strong>g this 11-year period.S<strong>in</strong>ce import<strong>an</strong>t officials typically hold more th<strong>an</strong> one position <strong>in</strong> these org<strong>an</strong>izations, wemake sure to match all <strong>in</strong>dividuals across the three groups, if necessary by obta<strong>in</strong><strong>in</strong>g extra<strong>in</strong>formation from other sources. We pay special attention to clarify<strong>in</strong>g <strong>in</strong>formation on each official’shometown, understood as the commune of patril<strong>in</strong>eal orig<strong>in</strong> <strong>in</strong> the Vietnamese legal context. Thislegally def<strong>in</strong>ed <strong>in</strong>formation appears, for example, on <strong>in</strong>dividual’s identity cards, <strong>an</strong>d needs notcorrespond to one’s birthplace. In the very few cases <strong>in</strong> which different hometowns are listed <strong>in</strong>different sources, we <strong>in</strong>clude all verifiable hometowns <strong>in</strong> the dataset. We exclude officials whosehometowns c<strong>an</strong>not be traced to the commune level (even when they are traceable to the districtlevel).Data on local <strong>in</strong>frastructures <strong>an</strong>d public goods come from the Vietnam Household Liv<strong>in</strong>gSt<strong>an</strong>dard Survey (VHLSS). This survey is supported technically <strong>an</strong>d f<strong>in</strong><strong>an</strong>cially by the World B<strong>an</strong>k,<strong>an</strong>d it is regarded as the most reliable data on liv<strong>in</strong>g st<strong>an</strong>dards <strong>in</strong> the country. The VHLSS, which<strong>in</strong>cludes a commune survey <strong>an</strong>d a household survey, is conducted every two years (2002, 2004, 2006<strong>an</strong>d 2008) from a r<strong>an</strong>dom, representative sample of about two thous<strong>an</strong>d <strong>an</strong>d two hundredcommunes out of about eleven thous<strong>an</strong>d communes <strong>in</strong> the country. The commune survey isconducted with several commune officials, while the household survey is conducted with a r<strong>an</strong>domsample of households <strong>in</strong> the commune. Our <strong>an</strong>alysis exploits data from both surveys, <strong>in</strong>clud<strong>in</strong>gcommune characteristics (i.e. area, population, average <strong>in</strong>come, average expenditure, geographical21
zone, rural/urb<strong>an</strong> classification), presence <strong>an</strong>d quality of various types of <strong>in</strong>frastructure <strong>in</strong> thecommunes (i.e. roads, market places, utilities, irrigation systems, schools, cl<strong>in</strong>ics/hospitals, culturalcenters, radio stations, b<strong>an</strong>k br<strong>an</strong>ches) <strong>an</strong>d commune chairm<strong>an</strong> characteristics (i.e. age, gender,education, years <strong>in</strong> position, previous position).We then match each official to his or her commune of patril<strong>in</strong>eal orig<strong>in</strong>. Only communesclassified as rural are <strong>in</strong>cluded so as to avoid the complexity of <strong>in</strong>frastructure development <strong>in</strong> urb<strong>an</strong>areas. We exclude the top 4 positions <strong>in</strong> the country, namely the General Secretary of theCommunist Party of Vietnam, the President, the Prime M<strong>in</strong>ister <strong>an</strong>d the Chairm<strong>an</strong> of the NationalAssembly, to focus on the pervasiveness of favoritism beyond the top. This results <strong>in</strong> a total of 422officials out of a total of 1,791 <strong>in</strong> the three sources of collected data, com<strong>in</strong>g from 351 communes.These 422 officials hold a total of 678 positions, consist<strong>in</strong>g of 119 positions (17.6%) <strong>in</strong> the PartyCentral Committee, 102 positions (15.0%) <strong>in</strong> the Central Government, 290 positions (42.8%) <strong>in</strong> theNational Assembly <strong>an</strong>d 167 positions (24.6%) <strong>in</strong> Prov<strong>in</strong>cial People’s Committees. All 60 Vietnameseprov<strong>in</strong>ces, exclud<strong>in</strong>g the 3 national cities, are covered <strong>in</strong> this sample of 351 communes.F<strong>in</strong>ally, based on these matches we construct our ma<strong>in</strong> sample, <strong>in</strong> which each observationcomb<strong>in</strong>es <strong>an</strong> official, his rural home commune <strong>an</strong>d a year for which VHLSS data for this communeare available (2002, 2004, 2006 or 2008). We <strong>in</strong>clude communes that are connected to at least oneofficial <strong>in</strong> this period. This ma<strong>in</strong> sample consists of 1,542 observations, roughly equally distributedover the years (376, 393, 398 <strong>an</strong>d 375 observations for the years 2002, 2004, 2006 <strong>an</strong>d 2008,respectively).4.2 Data descriptionTable 1 summarizes data patterns. In P<strong>an</strong>el A, we describe politici<strong>an</strong>s <strong>in</strong> the matched sampleas well as the full collected dataset of politici<strong>an</strong>s. Given that VHLSS covers only a r<strong>an</strong>dom sample ofall communes <strong>in</strong> the country, we c<strong>an</strong> match roughly one quarter of collected politici<strong>an</strong>s to22
communes available <strong>in</strong> the VHLSS. This proportion is around 20% for Central <strong>an</strong>d Prov<strong>in</strong>cialGovernments, for which our data source conta<strong>in</strong>s more miss<strong>in</strong>g data <strong>in</strong> terms of hometown: 30%for the National Assembly <strong>an</strong>d 35% for the Party’s Central Committee. This is approximately thecoverage rate of VHLSS for rural communes, which we are <strong>in</strong>terested <strong>in</strong>. (The VHLSS oversamplesrural areas compared to urb<strong>an</strong> areas.)[Insert Table 1 here]As discussed, this period is marked by the <strong>in</strong>flation of key positions <strong>in</strong> Vietnamese politics.The size of the Central Committee <strong>in</strong>creased by 26.4% between 2002 <strong>an</strong>d 2007, from 148 to 187(start<strong>in</strong>g from <strong>an</strong> even lower number <strong>in</strong> its 8 th term), <strong>an</strong> exp<strong>an</strong>sion that was matched by the numberof Central Government positions (46.9%, from 128 <strong>in</strong> 1997-2002 to 188 <strong>in</strong> 2003-2007). In contrast,the size of the National Assembly was reduced from 499 <strong>in</strong> 2003-2007 to 456 <strong>in</strong> 2008-2011. Mostmembers of the Central Committee hold more th<strong>an</strong> one key position as counted <strong>in</strong> our data; themajority of them hold at least 3. Me<strong>an</strong>while, the majority of the legislature members do not hold <strong>an</strong>yother key position. Across the matched <strong>an</strong>d total samples, we see roughly similar shares of differenttypes of positions.Among those that have at least one connection as shown <strong>in</strong> P<strong>an</strong>el A, there are roughly twopositions connected to each commune. P<strong>an</strong>el B further shows that on average each commune has1.2 politici<strong>an</strong>s <strong>in</strong> office throughout the 2000-2010 period. The survey waves of 2004 <strong>an</strong>d 2008witnessed the majority of promotions, correspond<strong>in</strong>g to new terms of the Central Committee <strong>in</strong>2007, the Government (start<strong>in</strong>g <strong>in</strong> 2003-2004) <strong>an</strong>d most strongly, the National Assembly (start<strong>in</strong>g <strong>in</strong>2003 <strong>an</strong>d 2007). These waves are therefore largely responsible for the identification <strong>in</strong> ourregressions. Our empirical strategy uses a measure of power capital, understood as the accumulatednumber of positions connected to a commune, regardless of whether a politici<strong>an</strong> rema<strong>in</strong>s <strong>in</strong> thatposition. P<strong>an</strong>el B shows that power capital accumulates fastest for the National Assembly <strong>an</strong>d more23
slowly for Government <strong>an</strong>d Central Committee positions. On the other h<strong>an</strong>d, the coverage of oursample is fairly stable over time <strong>in</strong> terms of adm<strong>in</strong>istrative units (commune, district or prov<strong>in</strong>ce),area <strong>an</strong>d population. We observe a stark <strong>in</strong>crease <strong>in</strong> the share of good-quality roads, suggestive thatthe effect of promotions will be most remarkable for road quality.Communes with connections to politici<strong>an</strong>s are different from the full VHLSS sample <strong>in</strong> <strong>an</strong>umber of ways. The former are markedly smaller but more densely populated <strong>an</strong>d considerably lesslikely to be poor (even though their average <strong>in</strong>come is on par with the full sample’s). When it comesto basic <strong>in</strong>frastructure, there seem to be import<strong>an</strong>t disparities regard<strong>in</strong>g good-quality roads,marketplaces <strong>an</strong>d radio stations. Given the concern of selection bias <strong>in</strong> the group of communesconnected to at least one politici<strong>an</strong>, our empirical strategy rema<strong>in</strong>s conservative <strong>in</strong>sofar as it onlyuses the sample of matched communes, i.e. it aims to estimate the Average Treatment Effect on theTreated <strong>in</strong>stead of the overall Average Treatment Effect of politici<strong>an</strong>s’ promotions.5. Empirical StrategyIn <strong>an</strong> ideal experiment, we would r<strong>an</strong>domly assign promotions to officials <strong>an</strong>d estimate the impactof those promotions on the <strong>in</strong>frastructure <strong>in</strong> the politici<strong>an</strong>s’ hometowns. Given r<strong>an</strong>domization’s<strong>in</strong>feasibility, our ma<strong>in</strong> task is to deal with all possible endogeneity of officials’ assignments. Suchendogeneity may arise <strong>in</strong> several ways. Statically, more powerful prov<strong>in</strong>ces may have better<strong>in</strong>frastructure <strong>an</strong>d more officials promoted to the Central Government. Dynamically, officials fromprov<strong>in</strong>ces that develop faster may be promoted more quickly.A st<strong>an</strong>dard solution for the first (static) type of endogeneity is to <strong>in</strong>clude location-fixedeffect. A solution for the second (dynamic) type of endogeneity is to test if promotions of officialscorrelate with <strong>in</strong>frastructure improvements <strong>in</strong> communes near their home communes. If certa<strong>in</strong>local conditions drive both promotions <strong>an</strong>d <strong>in</strong>frastructure <strong>in</strong>vestment, we should see a correlation of24
promotions <strong>an</strong>d <strong>in</strong>frastructure <strong>in</strong> nearby communes. Another robustness check is to <strong>in</strong>clude leads <strong>in</strong>the regressions to see if the local <strong>in</strong>frastructure improves before officials are promoted. If thishappens, it <strong>in</strong>dicates a potential reverse causality problem.Even after we have <strong>in</strong>cluded all location-fixed effects <strong>an</strong>d run these tests, there might still be<strong>an</strong>other type of endogeneity. If the attitude of officials towards their hometowns correlates withtheir ability to get promoted, our estimation c<strong>an</strong> still be biased. For example, if more practicalofficials care less about their home communes but get promoted more frequently, this correlationwill bias our estimate towards zero. A solution to this is to <strong>in</strong>clude a fixed effect for each communeofficialpair.With all these considerations <strong>in</strong> m<strong>in</strong>d, we use fixed-effect regressions <strong>in</strong> p<strong>an</strong>el data toidentify the impact of officials’ promotions on <strong>in</strong>frastructure construction <strong>in</strong> their rural homecommunes. Our benchmark regression considers each unit of observation as a comb<strong>in</strong>ation of ar<strong>an</strong>k<strong>in</strong>g official (as def<strong>in</strong>ed <strong>in</strong> the previous section), his rural home commune <strong>an</strong>d a year ofobservation. The outcome variable is the presence of each type of <strong>in</strong>frastructure <strong>in</strong> each hometown<strong>in</strong> a given year of observation. The treatment variable is the number of positions held by eachofficial from 2000 until the year of observation. By <strong>in</strong>clud<strong>in</strong>g fixed effects for each year, eachgeographical zone <strong>an</strong>d each pair of official <strong>an</strong>d home communes, the regressions yield <strong>an</strong> estimate ofthe effect of hav<strong>in</strong>g a new r<strong>an</strong>k<strong>in</strong>g position on the official’s hometown <strong>in</strong>frastructure. The multitudeof fixed effects <strong>in</strong> use ensures that the estimate is unconfounded by <strong>an</strong>y unobservable characteristicsbelong<strong>in</strong>g to the same year, the same geographical zone or the same pair of official <strong>an</strong>d hometown.Our benchmark regression equation is as follows:Infrastructure cpt = β<strong>Po</strong>werCapital p,t-L + X cpt + δ t + δ cp + ε cpt .The <strong>in</strong>dices c, p, <strong>an</strong>d t respectively represent the home commune c of official p <strong>in</strong> year t. Ldenotes the possible lag <strong>in</strong> year(s) after a promotion. The left-h<strong>an</strong>d-side variable Infrastructure refers25
to the presence of one of the different types of <strong>in</strong>frastructure <strong>in</strong> the commune, <strong>in</strong>clud<strong>in</strong>g the qualityof road access to villages, local radio stations, preschools <strong>an</strong>d schools, irrigation <strong>an</strong>d water systems,<strong>an</strong>d marketplaces. The vector X cpt regroups observable controls by commune, official <strong>an</strong>d year; thefixed effects by year <strong>an</strong>d by commune-official pair are respectively denoted as δ t <strong>an</strong>d δ cp ; ε cpt is theerror term.The right-h<strong>an</strong>d-side variable <strong>Po</strong>wer Capital adds up all r<strong>an</strong>k<strong>in</strong>g positions ever held by eachofficial until year t-L. It is a social-political capital measure calculated us<strong>in</strong>g all r<strong>an</strong>k<strong>in</strong>g positions everheld by each official, <strong>in</strong>clud<strong>in</strong>g term<strong>in</strong>ated ones. This measure acknowledges that officials keep theirconnections <strong>an</strong>d <strong>in</strong>fluence even after leav<strong>in</strong>g <strong>an</strong> office. In Vietnam, while the ascension to a newposition is a signific<strong>an</strong>t ch<strong>an</strong>ge, most of the time leav<strong>in</strong>g a r<strong>an</strong>k<strong>in</strong>g position before retirement onlyme<strong>an</strong>s a switch to <strong>an</strong>other, usually more import<strong>an</strong>t one. Most commonly, such switches do notprevent the official from hav<strong>in</strong>g strong <strong>in</strong>fluence on his previous office, even <strong>in</strong> the case ofretirement. In one recent case, for <strong>in</strong>st<strong>an</strong>ce, a former M<strong>in</strong>ister of Education had rel<strong>in</strong>quished thatposition to become Deputy Prime M<strong>in</strong>ister; however, he still exerted particularly strong <strong>in</strong>fluence onthe M<strong>in</strong>istry of Education. In other words, the relative import<strong>an</strong>ce of <strong>an</strong> official <strong>in</strong> the governmentis best measured by the accumulation of the import<strong>an</strong>t, r<strong>an</strong>k<strong>in</strong>g positions he has held over time.In some specifications where there is little variation at the commune level such as roadaccess to the commune (already present <strong>in</strong> most communes), we use the correspond<strong>in</strong>g village-leveloutcome variable (a commune usually consists of several villages.) Such variables are measured <strong>in</strong> avillage r<strong>an</strong>domly sampled by the VHLSS <strong>in</strong> that commune, e.g. the presence of asphalt road accessto the village. Such a variable is then a noisy measure of the proportion of villages <strong>in</strong> the communewith that type of <strong>in</strong>frastructure (e.g. asphalt road access) <strong>in</strong> which the measurement error is aclassical sampl<strong>in</strong>g error <strong>in</strong>dependent of all right-h<strong>an</strong>d-side variables. The presence of thismeasurement error only <strong>in</strong>creases the st<strong>an</strong>dard errors of estimators, without affect<strong>in</strong>g their26
consistency. We c<strong>an</strong> thus <strong>in</strong>terpret the estimate of β as the effect of <strong>an</strong> official’s promotion on theproportion of villages <strong>in</strong> his home commune with a certa<strong>in</strong> type of <strong>in</strong>frastructure.In presence of the commune-official fixed effect, the fixed-effect estimator of β is identifiedby the ch<strong>an</strong>ges of <strong>Po</strong>wer Capital with<strong>in</strong> each pair of commune <strong>an</strong>d official. It is effectively <strong>in</strong>terpretedas the effect of <strong>an</strong> official’s <strong>in</strong>creased r<strong>an</strong>k<strong>in</strong>g position, i.e. his accumulation of more power, on theprobability of <strong>in</strong>frastructure improvement <strong>in</strong> his home commune. In a framework withheterogeneous effects, the estimator is the treatment effect averaged over all officials where weobserve a new r<strong>an</strong>k<strong>in</strong>g position, i.e. a ch<strong>an</strong>ge <strong>in</strong> <strong>Po</strong>wer Capital, dur<strong>in</strong>g the considered period. Due tothe fixed effects, the estimate of β is not confounded by <strong>an</strong>y time-<strong>in</strong>vari<strong>an</strong>t characteristics of the paircommune-official, <strong>in</strong>clud<strong>in</strong>g geographical conditions of the commune such as dist<strong>an</strong>ce to largecities, dist<strong>an</strong>ce to major rivers <strong>an</strong>d water sources <strong>an</strong>d background conditions of the official <strong>in</strong>clud<strong>in</strong>ggender <strong>an</strong>d education, year of participation <strong>in</strong> the rul<strong>in</strong>g party <strong>an</strong>d year of first-r<strong>an</strong>k<strong>in</strong>g position. The<strong>in</strong>clusion of a year-fixed effect further dilutes concerns about macroeconomic ch<strong>an</strong>ges that couldaffect both new promotions <strong>an</strong>d <strong>in</strong>frastructure construction.The strength of a fixed-effect model is its control for all time-<strong>in</strong>variable factors. As discussedabove, we also pay special attention to <strong>an</strong>d test for time-vari<strong>an</strong>t factors, which may drive ch<strong>an</strong>ges <strong>in</strong>both officials’ promotion <strong>an</strong>d communes’ <strong>in</strong>frastructure. As Vietnam has more th<strong>an</strong> eleven thous<strong>an</strong>dcommunes, it is unlikely that the economic situation <strong>in</strong> a t<strong>in</strong>y home commune c<strong>an</strong> affect the lot of ar<strong>an</strong>k<strong>in</strong>g official at the central level. The reverse causality or omitted-variable issue, if it exists, shouldtake place at the district level, which may <strong>in</strong>fluence political promotions on a larger scale. If this istrue, we must see a correlation between the official’s promotion <strong>an</strong>d the development of othercommunes <strong>in</strong> his home district <strong>an</strong>d prov<strong>in</strong>ce. As shown <strong>in</strong> the next section, we will look forevidence for such correlation. Further, if the economic situation <strong>in</strong> a home commune leads to a27
political promotion, then we may expect that ch<strong>an</strong>ges <strong>in</strong> commune <strong>in</strong>frastructure c<strong>an</strong> precedepromotions. By <strong>in</strong>clud<strong>in</strong>g different leads <strong>in</strong> our econometric model, we c<strong>an</strong> test for such a relation.6. Empirical resultsWe employ this benchmark empirical strategy to different data subsamples to address the follow<strong>in</strong>gquestions: (i) Does favoritism arise <strong>in</strong> <strong>an</strong> authoritari<strong>an</strong> regime? (ii) Who is powerful <strong>in</strong> the politicalhierarchy? <strong>an</strong>d (iii) What is the motive of favoritism? These questions correspond to Hypotheses I,II <strong>an</strong>d III discussed <strong>in</strong> Section 3. We report the results for each question below.6.1 Does favoritism arise <strong>in</strong> <strong>an</strong> authoritari<strong>an</strong> regime?The more precise question is this: c<strong>an</strong> officials other th<strong>an</strong> top leaders exercise favoritism <strong>in</strong>authoritari<strong>an</strong> regimes? We first present our estimations of the impacts of <strong>an</strong> official's promotion to ar<strong>an</strong>k<strong>in</strong>g position on the construction of various types of <strong>in</strong>frastructure <strong>in</strong> his rural home commune<strong>in</strong> Table 2, us<strong>in</strong>g the ma<strong>in</strong> sample discussed <strong>in</strong> Section 4, which excludes the top leaders (GeneralSecretary of the CPV, President, Prime M<strong>in</strong>ister <strong>an</strong>d Chairm<strong>an</strong> of the National Assembly). We f<strong>in</strong>dstrong positive effects on several outcomes, some with a lag, <strong>in</strong>clud<strong>in</strong>g the construction of localradio stations <strong>an</strong>d the improvement of local roads with<strong>in</strong> a year of the promotion, the constructionof preschools <strong>an</strong>d irrigation systems, the <strong>in</strong>troduction of cle<strong>an</strong> water access with a one-year lag <strong>an</strong>dthe construction of commune market places with a two-year lag.[Insert Table 2 here]The effects are immediate for the construction of local radio stations <strong>an</strong>d the improvementof local roads. As shown <strong>in</strong> column (1), a native official's new promotion <strong>in</strong>creases the probability ofhav<strong>in</strong>g a local radio station by <strong>an</strong> estimated 3.5 percentage po<strong>in</strong>ts. Column (2) shows a similar effectof 6.2 percentage po<strong>in</strong>ts on local road quality. This outcome variable is measured as the grade ofroad access (detailed <strong>in</strong> data appendix) to a village r<strong>an</strong>domly sampled by the VHLSS <strong>in</strong> the28
commune. As discussed <strong>in</strong> the previous section, the estimate <strong>in</strong> column (2) c<strong>an</strong> be <strong>in</strong>terpreted as theimpact of <strong>an</strong> official’s promotion on the proportion of villages <strong>in</strong> his home commune with highergraderoad access.A new promotion effects other outcome variables with lags. With a one-year lag, we f<strong>in</strong>dpositive impacts of the promotion on the presence of preschools <strong>an</strong>d irrigation systems as well ascle<strong>an</strong> water access, as presented <strong>in</strong> columns (3) to (5). The effects are 2.5 percentage po<strong>in</strong>ts,signific<strong>an</strong>t at 10%; 6.4 percentage po<strong>in</strong>ts, signific<strong>an</strong>t at 10% <strong>an</strong>d 4.9 percentage po<strong>in</strong>ts, signific<strong>an</strong>t at5%, respectively. With a two-year lag, there is strong evidence of impact on the presence ofcommune marketplaces, with <strong>an</strong> estimate of 5.9 percentage po<strong>in</strong>ts at 5% signific<strong>an</strong>ce. The differentlags observed for different outcome variables could be expla<strong>in</strong>ed by the time required for theconstruction of different types of <strong>in</strong>frastructure, as a local radio station c<strong>an</strong> be easily set up with<strong>in</strong>one year while a commune-level market will require considerably more time for l<strong>an</strong>d clear<strong>an</strong>ce <strong>an</strong>dconstruction. The effects of a new promotion on other outcome variables or on these same variablesbut with different lags, though noisier, are also qualitatively consistent with the above f<strong>in</strong>d<strong>in</strong>gs.The ma<strong>in</strong> sample used <strong>in</strong> P<strong>an</strong>el A <strong>in</strong>cludes communes where some types of <strong>in</strong>frastructurewere already present at the beg<strong>in</strong>n<strong>in</strong>g <strong>an</strong>d throughout the period from 2002 to 2008. Exclud<strong>in</strong>gthese communes from the ma<strong>in</strong> sample with respect to each type of <strong>in</strong>frastructure gives us a more<strong>in</strong>formative estimate of the impact of <strong>an</strong> official's new promotion on the construction of therespective type of <strong>in</strong>frastructure <strong>in</strong> his rural home commune. P<strong>an</strong>el B of Table 2 reports thebenchmark regression results us<strong>in</strong>g such ref<strong>in</strong>ed samples.We f<strong>in</strong>d that not only do the estimates derived from these ref<strong>in</strong>ed samples rema<strong>in</strong>statistically signific<strong>an</strong>t despite much smaller sample sizes (with the exception of pre-schoolconstruction), they are also considerably larger th<strong>an</strong> those derived from the ma<strong>in</strong> sample reported <strong>in</strong>P<strong>an</strong>el A. The estimated impact on local road quality <strong>in</strong>creases from 6.2 percentage po<strong>in</strong>ts <strong>in</strong> P<strong>an</strong>el A29
to 9.3 percentage po<strong>in</strong>ts <strong>in</strong> P<strong>an</strong>el B, while that on commune marketplaces <strong>in</strong>creases from 5.9 to 12.6percentage po<strong>in</strong>ts. The <strong>in</strong>creases <strong>in</strong> estimated impacts on local radio stations, irrigation systems, <strong>an</strong>dcle<strong>an</strong> water access, <strong>in</strong> percentage po<strong>in</strong>ts, are from 3.5 to 16.1, from 6.4 to 12.6 <strong>an</strong>d from 4.9 to 8.9respectively, <strong>an</strong>d the estimate on preschools soars to 31.8% (imprecisely estimated). The ch<strong>an</strong>gesreflect the fact that m<strong>an</strong>y <strong>in</strong>frastructures are already <strong>in</strong> place (we c<strong>an</strong>not observe otherimprovements of exist<strong>in</strong>g <strong>in</strong>frastructures); therefore, the actual impact on the probability of gett<strong>in</strong>geach new <strong>in</strong>frastructure (with lag) is as large as 10% or even higher.The results presented <strong>in</strong> both p<strong>an</strong>els of Table 2 are consistent with the claim of widespreadfavoritism among Vietnamese officials, shown <strong>in</strong> the form of newly bestowed <strong>in</strong>frastructure projects<strong>in</strong> their home communes. Given that our sample does not <strong>in</strong>clude top leaders, this f<strong>in</strong>d<strong>in</strong>g providessupport for Hypothesis I, which states that non-top officials <strong>in</strong> authoritari<strong>an</strong> regimes also exercisefavoritism.Table 3 reports further checks on the effect of <strong>an</strong> official's new promotion on other types ofoutcome variables, <strong>in</strong>clud<strong>in</strong>g commune average <strong>in</strong>come, expenditure <strong>an</strong>d population, all with a oneyearlag, <strong>an</strong>d the immediate <strong>in</strong>clusion <strong>in</strong>to the State's “poor commune support program,” controll<strong>in</strong>gfor year, zone <strong>an</strong>d commune-official or prov<strong>in</strong>ce-fixed effects. Column (1) reports the effect onaggregate <strong>in</strong>frastructure <strong>in</strong> the home commune, calculated as the total number of exist<strong>in</strong>g<strong>in</strong>frastructure items as surveyed by the VHLSS (detailed <strong>in</strong> data appendix). The estimate is 0.202,signific<strong>an</strong>t at 5%, suggest<strong>in</strong>g that the promotion <strong>in</strong>creases the probability of <strong>an</strong>y new <strong>in</strong>frastructureconstruction by as much as 20.2 percentage po<strong>in</strong>ts. Column (2) shows that the promotion has asignific<strong>an</strong>t effect of 1.7 percentage po<strong>in</strong>ts on the commune’s <strong>in</strong>clusion <strong>in</strong>to the State’s “poorcommune support program,” while, <strong>in</strong>terest<strong>in</strong>gly, the commune average <strong>in</strong>come – the key criterionestablished by the law – does not even predict such <strong>in</strong>clusion. In other words, the official’spromotion improves the hometown’s ch<strong>an</strong>ce of benefit<strong>in</strong>g immediately from the program, <strong>in</strong> l<strong>in</strong>e30
with the centralized nature of the program as discussed <strong>in</strong> Section 2. However, columns (3) <strong>an</strong>d (4)show that there is no evidence that <strong>an</strong> official's new promotion improves (or reduces) his rural homecommune’s liv<strong>in</strong>g st<strong>an</strong>dards <strong>in</strong> terms of its average <strong>in</strong>come <strong>an</strong>d expenditure. Both estimates are lessth<strong>an</strong> 1 percentage po<strong>in</strong>ts <strong>an</strong>d not statistically signific<strong>an</strong>t. Similarly, the promotion does not affect thecommune population as presented <strong>in</strong> column (5).[Insert Table 3 here]For robustness checks, we explore alternative specifications us<strong>in</strong>g different controls,different fixed effects, different lags <strong>an</strong>d different observation units for two key outcome variables:local road quality <strong>an</strong>d the presence of commune marketplaces. These are arguably the two mostimport<strong>an</strong>t variables to economic development <strong>in</strong> communes. Table 4 summarizes this exercise.[Insert Table 4 here]In P<strong>an</strong>el A of Table 4, we explore the effect of a native official's promotion on local roadquality (detailed <strong>in</strong> the data appendix) under various specifications. Column (1) shows thebenchmark specification with immediate effect, controll<strong>in</strong>g for commune average <strong>in</strong>come <strong>an</strong>dpopulation, as well as year, zone <strong>an</strong>d commune-official fixed effects as presented <strong>in</strong> Table 2.Columns (2) to (4) test the results with different controls, <strong>in</strong>clud<strong>in</strong>g no fixed effect, year-fixed effectonly <strong>an</strong>d commune-official fixed effect only. All estimates are positive, be<strong>in</strong>g 6.7 percentage po<strong>in</strong>ts,signific<strong>an</strong>t at 1%; 2.1 percentage po<strong>in</strong>ts, not statistically signific<strong>an</strong>t <strong>an</strong>d 14.6 percentage po<strong>in</strong>ts,signific<strong>an</strong>t at 1%, respectively. Columns (5) to (7) vary the time lag from a year before thepromotion to two years after. Column (5) <strong>in</strong>cludes both <strong>Po</strong>wer Capital at one year after the year ofobservation, i.e. its one-year forward value, <strong>an</strong>d <strong>Po</strong>wer Capital at the current year of observation <strong>in</strong>order to separate the effect of the promotion from potential noises that arise from circumst<strong>an</strong>cesthat pre-date the promotion. The 1-year forward value provides a placebo test of the effect: beforethe year of the promotion, we should not expect a positive effect on the outcome. Results from31
column (5) pass this test, as the coefficient of the 1-year forward value of <strong>Po</strong>wer Capital is negative 7.0percentage po<strong>in</strong>ts, signific<strong>an</strong>t at 10%, while the coefficient of the present value <strong>Po</strong>wer Capital is largeat 11.0 percentage po<strong>in</strong>ts, signific<strong>an</strong>t at 1%. Columns (6) <strong>an</strong>d (7) use <strong>Po</strong>wer Capital at one <strong>an</strong>d twoyear(s) before the year of observation, i.e. its one-year <strong>an</strong>d two-year lag values. The result with a oneyearlag is signific<strong>an</strong>t at 10%, while the result with a two-year lag is not, suggest<strong>in</strong>g that theimprovement <strong>in</strong> local road quality happens mostly <strong>in</strong> the immediate time w<strong>in</strong>dow after thepromotion.Lastly, while our benchmark regressions treat each comb<strong>in</strong>ation of <strong>an</strong> official, his homecommune <strong>an</strong>d year as equally weighted, <strong>in</strong> columns (8) <strong>an</strong>d (9) we use alternative observation unitsto verify that the results are not driven by over-weigh<strong>in</strong>g or under-weigh<strong>in</strong>g certa<strong>in</strong> communes.Column (8) uses a f<strong>in</strong>er observation unit by comb<strong>in</strong><strong>in</strong>g a r<strong>an</strong>k<strong>in</strong>g position (<strong>an</strong> official c<strong>an</strong> havemultiple r<strong>an</strong>k<strong>in</strong>g positions), the home commune of the official <strong>in</strong> the position <strong>an</strong>d a year; thetreatment variable <strong>Po</strong>wer Capital then takes b<strong>in</strong>ary values of 0 or 1. On the other h<strong>an</strong>d, column (9)uses a coarser observation unit of a commune <strong>in</strong> a year of observation, with the treatment variable<strong>Po</strong>wer Capital add<strong>in</strong>g up all r<strong>an</strong>k<strong>in</strong>g positions accumulated by all officials com<strong>in</strong>g from thatcommune. The impact estimates us<strong>in</strong>g these observation units are very close to the benchmarkestimate, be<strong>in</strong>g 5.6 <strong>an</strong>d 5.2 percentage po<strong>in</strong>ts, respectively, <strong>an</strong>d both statistically signific<strong>an</strong>t at 5%.We employ similar robustness checks for the outcome variable, commune marketplaces, <strong>in</strong>P<strong>an</strong>el B of Table 4. Column (1) shows the benchmark specification with a two-year lag <strong>an</strong>d the fullset of controls. Columns (2) to (4) test the results with different controls <strong>an</strong>d show that the effect onmarketplaces is robustly signific<strong>an</strong>t. Columns (5) to (7) vary the time lag from one year forward to atwo-year lag. There is no evidence of effect <strong>in</strong> <strong>an</strong>y of these columns, suggest<strong>in</strong>g that the tendency ofcommune marketplaces to be constructed a few years after promotions is due to their relativelylarger scale of construction. Columns (8) <strong>an</strong>d (9) use alternative observation units. The coefficients32
<strong>in</strong> columns (2) to (4) <strong>an</strong>d (8) to (9) are close to the benchmark estimate, even when some are notstatistically signific<strong>an</strong>t at conventional levels due to small sample sizes.One may worry that the evidence thus far arises from the official’s better <strong>in</strong>formation on thetargeted commune, which prompts the budget allocator to allocate more resources to thatcommune. This alternative expl<strong>an</strong>ation is a strong argument aga<strong>in</strong>st most f<strong>in</strong>d<strong>in</strong>gs regard<strong>in</strong>gfavoritism <strong>an</strong>d pork-barrel politics (e.g. Kramon <strong>an</strong>d <strong>Po</strong>sner 2012.) In our context, this story is<strong>in</strong>consistent with several details. First, better <strong>in</strong>formation should have been shared <strong>in</strong>dependently ofthe official’s power, <strong>an</strong>d thus before his promotion. M<strong>an</strong>y officials <strong>in</strong> the sample had already heldsome r<strong>an</strong>k<strong>in</strong>g positions, <strong>an</strong>d could have well tr<strong>an</strong>sferred their <strong>in</strong>formation. Because we f<strong>in</strong>d no effectprior to promotion, <strong>in</strong>formation shar<strong>in</strong>g is unlikely to be the cause beh<strong>in</strong>d the effect on<strong>in</strong>frastructure. Second, most officials had not lived <strong>in</strong> their hometowns for <strong>an</strong> extended period, sothe amount of <strong>in</strong>formation available to them that could improve the efficiency of public <strong>in</strong>vestments<strong>in</strong> those hometowns is unlikely to be better th<strong>an</strong> that of local budget allocators. F<strong>in</strong>ally,<strong>in</strong>frastructure projects <strong>in</strong> our <strong>an</strong>alysis are widely considered necessary <strong>in</strong> all communes, so furtherknowledge of local conditions is unlikely to affect the decision to undertake such constructions.6.2 Who has the power to give favors?Next we <strong>in</strong>vestigate the pervasiveness <strong>an</strong>d degree of favoritism among different groups ofVietnamese officials, <strong>in</strong>clud<strong>in</strong>g members of the National Assembly, Central Government <strong>an</strong>dProv<strong>in</strong>cial Government. While exist<strong>in</strong>g literature on favoritism <strong>in</strong> autocratic regimes has mostlyaddressed top-level officials, who have both the political <strong>in</strong>terest <strong>an</strong>d the power to favor certa<strong>in</strong>groups with<strong>in</strong> the population (e.g. Burgess et al 2011), our sample covers not only the very few atthe top but also a large number of mid-level officials. Us<strong>in</strong>g Proposition 2a, this <strong>in</strong>vestigation helpsshed light onto the power structure of different groups of Vietnamese political elites, as shown <strong>in</strong>Table 5. Columns 2-8 compare the effects of <strong>an</strong> official's new promotion on home commune road33
quality, one of the two key outcome variables 9 , us<strong>in</strong>g the benchmark regression <strong>in</strong> subsamples ofnon-chaired, all, non-National Assembly positions, Central Government positions, Prov<strong>in</strong>cialGovernment positions <strong>an</strong>d some comb<strong>in</strong>ations of these subsamples 10 .[Insert Table 5 here]In democracies, members of parliament are the key players <strong>in</strong> pork-barrel politics (Shepsle<strong>an</strong>d We<strong>in</strong>gast 1981, Bickers <strong>an</strong>d Ste<strong>in</strong> 2000). In authoritari<strong>an</strong> regimes, members of parliament mayplay a different role s<strong>in</strong>ce the Central Government <strong>an</strong>d rul<strong>in</strong>g party (whose members largely overlap)make major decisions (Malesky, Schuler <strong>an</strong>d Tr<strong>an</strong> 2012). In Vietnam, a regular, non-chaired memberof the National Assembly without <strong>an</strong>other r<strong>an</strong>k<strong>in</strong>g position <strong>in</strong> the CPV or Government c<strong>an</strong> hardlyuse his parliamentary membership as leverage for <strong>an</strong>y real benefits. Column (2) shows that <strong>an</strong>official's new promotion to such a non-chaired position <strong>in</strong> the National Assembly has no detectableeffect on his home commune road quality: the impact estimate is only 1.9 percentage po<strong>in</strong>ts <strong>an</strong>d notstatistically signific<strong>an</strong>t at conventional levels, compared to the benchmark estimate of 6.2 percentagepo<strong>in</strong>ts. Even when we extend this subsample to all National Assembly positions <strong>in</strong> column (3), theimpact estimate is still negligible, be<strong>in</strong>g only 2.8 percentage po<strong>in</strong>ts <strong>an</strong>d not statistically signific<strong>an</strong>t atconventional levels. On the contrary, <strong>in</strong> the subsample of non-National Assembly positions <strong>in</strong>column (4), which <strong>in</strong>cludes all rema<strong>in</strong><strong>in</strong>g Central Government, Prov<strong>in</strong>cial Government <strong>an</strong>d Party’sCentral Committee positions, we f<strong>in</strong>d a large impact estimate of 10.0 percentage po<strong>in</strong>ts, signific<strong>an</strong>tat 1%. This difference <strong>in</strong> statistical signific<strong>an</strong>ce level is not driven by sample sizes, as the number ofobservations <strong>in</strong> columns (2)-(4) are roughly even. Overall, these results are consistent with our view9 We also r<strong>an</strong> similar tests us<strong>in</strong>g other outcome variables, <strong>in</strong>clud<strong>in</strong>g the other key outcome variable, presence ofcommune marketplaces. The results from these tests are qualitatively similar to those presented above, although lesssignific<strong>an</strong>t.10 An official could hold more th<strong>an</strong> one position (e.g. a m<strong>in</strong>ister who is also a non-chair parliamentary member) <strong>an</strong>dtherefore could be <strong>in</strong>cluded <strong>in</strong> more th<strong>an</strong> one subsample. The correspond<strong>in</strong>g <strong>in</strong>dependent variable Accummulated <strong>Po</strong>weronly reflects the relev<strong>an</strong>t positions for each subsample.34
that the parliament has little power with<strong>in</strong> the Vietnamese political hierarchy <strong>an</strong>d therefore itsmembers have limited barga<strong>in</strong><strong>in</strong>g power to redirect resources to their hometowns.Columns (5)-(7) report the effect of <strong>an</strong> official's new promotion on his commune roadquality <strong>in</strong> a subsample of Central Government positions, a subsample of Prov<strong>in</strong>cial Governmentpositions <strong>an</strong>d the comb<strong>in</strong>ed subsample. All three po<strong>in</strong>t estimates are large, be<strong>in</strong>g 17.3, 8.2, <strong>an</strong>d 9.3percentage po<strong>in</strong>ts, respectively, compared to the benchmark estimate of 6.2 percentage po<strong>in</strong>ts <strong>an</strong>d,except for one with a small sample size, all statistically signific<strong>an</strong>t at 5%. Furthermore, we f<strong>in</strong>d that apromotion to a Central Government position has a larger <strong>an</strong>d statistically stronger impact on homecommuneroad quality th<strong>an</strong> a promotion to a Prov<strong>in</strong>cial Government position (17.3 compared to 8.2percentage po<strong>in</strong>ts), even though prov<strong>in</strong>cial leaders have direct control over budgetary allocations tocommunes. This result suggests the existence of <strong>an</strong> <strong>in</strong>formal ch<strong>an</strong>nel of <strong>in</strong>fluence through exch<strong>an</strong>gesof personal favors (i.e. between a Central Government member <strong>an</strong>d a local leader <strong>in</strong> this context) asdescribed <strong>in</strong> our theoretical model, <strong>an</strong>d the considerable political power of the Central Governmentthat allows it to affect public decisions beyond its jurisdiction.F<strong>in</strong>ally, column (8) reports the effect of <strong>an</strong> official's new promotion on his commune roadquality <strong>in</strong> the subsample of "middle-r<strong>an</strong>k<strong>in</strong>g" positions. As Proposition 2a suggests, the morepolitical power <strong>an</strong> official has, the larger the amount of favored allocation he c<strong>an</strong> direct to his homecommune. Thus, we would like to <strong>in</strong>vestigate if the effects of <strong>an</strong> official's new promotion on hiscommune road quality found <strong>in</strong> columns (4)-(7) are largely driven by only a few top-level officials, orif the observed hometown favoritism is much more pervasive among Vietnamese political elites. Todo so, we construct a subsample of "middle-r<strong>an</strong>k<strong>in</strong>g" positions, which excludes not only the top 4positions as <strong>in</strong> the benchmark sample but also all Deputy Prime M<strong>in</strong>isters, Vice Presidents, membersof the <strong>Po</strong>litburo <strong>an</strong>d chair-hold<strong>in</strong>g members of the Central Committee. The estimate of impact onimprovement <strong>in</strong> local road quality <strong>in</strong> this subsample is 7.2 percentage po<strong>in</strong>ts <strong>an</strong>d signific<strong>an</strong>t at 5%.35
Although this estimate is, as expected, lower th<strong>an</strong> that of 9.3 percentage po<strong>in</strong>ts <strong>in</strong> the subsample ofall non-National Assembly positions, it provides clear evidence that favoritism is not limited to onlytop-level officials, as shown <strong>in</strong> the exist<strong>in</strong>g literature, but is pervasive also <strong>in</strong> the midr<strong>an</strong>ge ofVietnamese politics.Together, the results from Table 5 show that hometown favoritism is a phenomenonwidespread across different groups <strong>an</strong>d r<strong>an</strong>ks of Vietnamese officials, consistent with Hypothesis I.The magnitude of such favoritism varies subst<strong>an</strong>tially among different r<strong>an</strong>ks <strong>an</strong>d divisions with<strong>in</strong> thegovernment, consistent with Hypothesis II. In particular, we f<strong>in</strong>d that even Prov<strong>in</strong>cial Governmentofficials are more powerful th<strong>an</strong> members of the legislative National Assembly. Central Governmentofficials, who have no authority over commune budget, turn out to be the most powerful <strong>in</strong>direct<strong>in</strong>g these public resources toward their hometowns. This pattern underl<strong>in</strong>es the import<strong>an</strong>ce of<strong>in</strong>formal authority <strong>an</strong>d the <strong>in</strong>consequence of legislative bodies <strong>in</strong> less democratic countries.We now ask which <strong>in</strong>stitutional environments are more likely to encourage or prohibit thesort of favoritism discussed above, us<strong>in</strong>g a measure of prov<strong>in</strong>cial govern<strong>an</strong>ce. As district <strong>an</strong>dprov<strong>in</strong>cial authorities decide commune budgets, r<strong>an</strong>k<strong>in</strong>g officials must seek approval from theseoffices <strong>in</strong> order to <strong>in</strong>tervene <strong>in</strong> <strong>in</strong>frastructure construction <strong>in</strong> their hometowns. Consequently, whenprov<strong>in</strong>cial leaders have more flexibility <strong>in</strong> craft<strong>in</strong>g policies, they c<strong>an</strong> better commit to <strong>an</strong>d honorquid-pro-quo deals with r<strong>an</strong>k<strong>in</strong>g officials; <strong>in</strong> such cases the latter are expected to be more able toch<strong>an</strong>nel resources toward their hometown budgets. We test this hypothesis with the use ofprov<strong>in</strong>cial govern<strong>an</strong>ce <strong>in</strong>dicators taken from the Vietnam Prov<strong>in</strong>cial Competitiveness Indices (PCI),a set of survey-based <strong>in</strong>dices of <strong>in</strong>dustries’ govern<strong>an</strong>ce perceptions that has been systematicallyconstructed with the help from the UNDP s<strong>in</strong>ce 2006. Among the available <strong>in</strong>dicators, we selectthree that are relev<strong>an</strong>t to the discretionary power of prov<strong>in</strong>cial leadership, <strong>in</strong>clud<strong>in</strong>g the <strong>in</strong>dex ofprov<strong>in</strong>cial leadership proactiveness, the <strong>in</strong>dex of the lack of <strong>in</strong>formal costs to bus<strong>in</strong>ess <strong>an</strong>d the36
tr<strong>an</strong>sparency score of the prov<strong>in</strong>ce. We synthesize a composite measure of prov<strong>in</strong>cial discretionarypolicies, abbreviated as PDP, as the proactiveness score m<strong>in</strong>us the score on lack of <strong>in</strong>formal costs,m<strong>in</strong>us the tr<strong>an</strong>sparency score, <strong>an</strong>d take its average over the period of 2006 to 2008, the perioddur<strong>in</strong>g which the PCI overlaps with our sample. As <strong>in</strong> previous subsections, the sample is divided atthe medi<strong>an</strong> of the PDP scores. Table 6 reports the benchmark regression results for the twosubsamples.[Insert Table 6 here]P<strong>an</strong>els A <strong>an</strong>d B of Table 6 present the benchmark regression results with subsamples ofcommunes <strong>in</strong> prov<strong>in</strong>ces with above-medi<strong>an</strong> PDP scores (i.e. where prov<strong>in</strong>cial leaderships have morediscretionary power) <strong>an</strong>d those with below-medi<strong>an</strong> PDP scores, respectively. The effects of a nativeofficial’s promotion on two key outcome variables – local road quality <strong>an</strong>d presence of communemarketplaces – <strong>in</strong> each subsample as shown <strong>in</strong> columns (2) <strong>an</strong>d (6) of each p<strong>an</strong>el confirm ourhypothesis that more flexible prov<strong>in</strong>cial <strong>in</strong>stitutional environments better allow r<strong>an</strong>k<strong>in</strong>g officials to<strong>in</strong>fluence new <strong>in</strong>frastructure construction <strong>in</strong> their home communes. In the subsample with higherPDP scores, the estimates for improvement <strong>in</strong> local road quality <strong>an</strong>d construction of communemarketplaces are both large (7.1 <strong>an</strong>d 8.5 percentage po<strong>in</strong>ts, respectively) <strong>an</strong>d signific<strong>an</strong>t (at 5%),while <strong>in</strong> the other subsample, the effects are not statistically signific<strong>an</strong>t at conventional levels. Theseresults suggest that discretionary authority facilitates favoritism.6.3 What is the motive of hometown favoritism?In exist<strong>in</strong>g studies of political favoritism, the identification of the motive of favoritism represents aformidable challenge. Officials may favor friends <strong>an</strong>d relatives because of directed altruism towardstheir k<strong>in</strong>, or as a result of strategic calculation <strong>in</strong> build<strong>in</strong>g <strong>an</strong>d profit<strong>in</strong>g from a political base. For<strong>in</strong>st<strong>an</strong>ce, pork-barrel politics are mostly expla<strong>in</strong>ed <strong>in</strong> terms of rewards to political constituencies, <strong>an</strong>d37
ethnic favoritism by certa<strong>in</strong> dictators arguably serves to build a coalition of support (Padro-i-Miquel2007).<strong>Po</strong>litical motive versus social preference: In our empirical context, we c<strong>an</strong> compare the import<strong>an</strong>ceof these two motives by assess<strong>in</strong>g favoritism at the commune <strong>an</strong>d the district levels. As argued <strong>in</strong>Proposition 3, mov<strong>in</strong>g from the commune to the district dilutes the social preference motive, s<strong>in</strong>cethe larger population is less related to its officials. In contrast, the political motive is re<strong>in</strong>forcedbecause a larger district c<strong>an</strong> leverage greater political support for its officials. We thus test for thepolitical support mech<strong>an</strong>ism by replicat<strong>in</strong>g the set of benchmark regressions on samples that matchr<strong>an</strong>k<strong>in</strong>g officials to their home districts <strong>in</strong>stead of their home communes. Table 7 summarizes theresults from this exercise.[Insert Table 7 here]Each observation used <strong>in</strong> P<strong>an</strong>el A of Table 7 comb<strong>in</strong>es a r<strong>an</strong>k<strong>in</strong>g official, his home district<strong>an</strong>d a year for which VHLSS data for at least one commune <strong>in</strong> that district are available. The valueof each outcome variable at the district level is then calculated as the average among all the surveyedcommunes <strong>in</strong> the district. The resulted estimates are all well below 1 percentage po<strong>in</strong>t <strong>an</strong>d are notstatistically signific<strong>an</strong>t at conventional levels; thus they refute the expl<strong>an</strong>ation that r<strong>an</strong>k<strong>in</strong>g officialsgr<strong>an</strong>t favors to their home districts <strong>in</strong> exch<strong>an</strong>ge for political support at the local level. In P<strong>an</strong>el B ofTable 7, we estimate the impact of <strong>an</strong> official's new promotion on <strong>in</strong>frastructure construction <strong>in</strong>non-home communes <strong>in</strong> his home district, us<strong>in</strong>g a sample <strong>in</strong> which each observation comb<strong>in</strong>es ar<strong>an</strong>k<strong>in</strong>g official, a non-home commune <strong>in</strong> his home district <strong>an</strong>d a year for which VHLSS data for thecommune are available. Aga<strong>in</strong>, all the result<strong>in</strong>g estimates are close to zero <strong>an</strong>d not statisticallysignific<strong>an</strong>t. These results show strong evidence that the observed favoritism is driven by officials'social preferences toward their hometowns rather th<strong>an</strong> by their desires for political support. This isconsistent with Hypothesis III.38
Connection: Let us <strong>in</strong>vestigate the favoritism motive further. If favoritism is based on thepreference of r<strong>an</strong>k<strong>in</strong>g officials, we should expect that the social dist<strong>an</strong>ce between the official <strong>an</strong>d hisrural home commune determ<strong>in</strong>es the magnitude of favoritism. We use the age gap between theofficial <strong>an</strong>d the commune chairperson as a proxy for social proximity. 11 In Table 8, we report theresults from the benchmark regressions with subsamples divided accord<strong>in</strong>g to the age gap betweenthe official <strong>an</strong>d his home commune's chairperson, us<strong>in</strong>g the sample medi<strong>an</strong> of a 10-year age gap asthe division threshold.[Insert Table 8 here]P<strong>an</strong>els A <strong>an</strong>d B of Table 8 present the benchmark regression results for the subsamples ofcommunes where the age gap is below <strong>an</strong>d above 10 years, respectively. P<strong>an</strong>el A shows that acommune benefits greatly from a native official's promotion when the commune chairperson <strong>an</strong>dthe official are of the same generation: the estimate for improvement <strong>in</strong> local road quality is 10.0percentage po<strong>in</strong>ts, signific<strong>an</strong>t at 1%, <strong>an</strong>d that for commune marketplaces is 6.1%, though notstatistically signific<strong>an</strong>t due to small sample size. All coefficients <strong>in</strong> P<strong>an</strong>el A are considerably largerth<strong>an</strong> their counterparts <strong>in</strong> P<strong>an</strong>el B, where the commune chairperson is not of the same generation asthe official. In fact, the only signific<strong>an</strong>t effect <strong>in</strong> P<strong>an</strong>el B is that of local road quality, but even thateffect is only two thirds of the correspond<strong>in</strong>g effect found <strong>in</strong> P<strong>an</strong>el A. The evidence suggests thatcommune chairs play <strong>an</strong> active role <strong>in</strong> the mech<strong>an</strong>ism at work, <strong>an</strong>d all the more so when they arecloser to the promoted native officials.Commune needs: If favoritism is pr<strong>in</strong>cipally motivated by <strong>an</strong> official’s social preferences for hishometown, we expect the effect to be decl<strong>in</strong><strong>in</strong>g <strong>in</strong> the commune’s average <strong>in</strong>come, as the official isless will<strong>in</strong>g to give to his wealthier relatives. This decl<strong>in</strong>e should be similar for the two key11 VHLSS is fortunately one among the very few surveys of the World B<strong>an</strong>k’s Liv<strong>in</strong>g St<strong>an</strong>dards Measurement Surveysthat <strong>in</strong>cludes <strong>in</strong>formation on commune officials.39
<strong>in</strong>frastructures <strong>in</strong> our paper, measured as local road quality <strong>an</strong>d presence of commune marketplaces.On the other h<strong>an</strong>d, one may expect the benefits per capita of a marketplace to be <strong>in</strong>creas<strong>in</strong>g <strong>in</strong> thepopulation size, th<strong>an</strong>ks to the economies of scale of such a service. Therefore, the effect onmarketplace construction is expected to be <strong>in</strong>creas<strong>in</strong>g <strong>in</strong> the population size of the commune. S<strong>in</strong>cethe economies of scale are much less clear <strong>in</strong> the case of village roads, we should not expect arelationship between the effect on local road quality <strong>an</strong>d the commune population size.The variation of the favoritism effect on local road quality <strong>an</strong>d the presence of communemarketplaces is best illustrated with graphs that show the non-parametric relationship between eacheffect <strong>an</strong>d the basel<strong>in</strong>e variable (average <strong>in</strong>come or population size). We construct such graphs byrunn<strong>in</strong>g semi-parametric local l<strong>in</strong>ear regressions of the outcome variable (namely local road qualityor commune marketplace) at each value of the basel<strong>in</strong>e, weighted by a Gaussi<strong>an</strong> kernel with ab<strong>an</strong>dwidth of 10% of the total r<strong>an</strong>ge of the basel<strong>in</strong>e, 12 on the treatment variable of <strong>Po</strong>wer Capital(with a two-year lag for presence of commune marketplaces) together with the controls <strong>an</strong>d fixedeffects <strong>in</strong> the benchmark regression; we then use the estimated effect as the local, semi-parametricestimate of a native official's promotion on the outcome at each value of the basel<strong>in</strong>e variable. Toprovide <strong>an</strong> example, <strong>in</strong> Figure 2 P<strong>an</strong>el A we divide the full r<strong>an</strong>ge of the logarithm of commune’saverage <strong>in</strong>come <strong>in</strong>to a 100-po<strong>in</strong>t grid, run a local l<strong>in</strong>ear regression of village road quality on <strong>Po</strong>werCapital with Gaussi<strong>an</strong> kernel weight at each of these po<strong>in</strong>ts, us<strong>in</strong>g all controls <strong>an</strong>d fixed effects <strong>in</strong> thebenchmark regression <strong>in</strong> Table 1A, <strong>an</strong>d then report the estimated coefficient of <strong>Po</strong>wer Capital as apo<strong>in</strong>t on the graph.Figure 2 then reports the variations of favoritism accord<strong>in</strong>g to average <strong>in</strong>come for local roadquality (P<strong>an</strong>el A) <strong>an</strong>d presence of commune marketplaces (P<strong>an</strong>el B). Both figures clearly show asharp drop <strong>in</strong> favoritism at a certa<strong>in</strong> level of <strong>in</strong>come, consistent with the expl<strong>an</strong>ation regard<strong>in</strong>g social12 The results are very similar when we vary the b<strong>an</strong>dwidth from 5% to 20% of the total r<strong>an</strong>ge.40
preferences directed towards hometowns. Figure 2 shows the <strong>an</strong>alogous variations accord<strong>in</strong>g topopulation size. While it is hard to recognize a trend <strong>in</strong> the effect for local road quality, we c<strong>an</strong> seeclearly the <strong>in</strong>creas<strong>in</strong>g effect for the presence of commune marketplaces for the most import<strong>an</strong>tr<strong>an</strong>ge of values of population size. The f<strong>in</strong>d<strong>in</strong>gs from these figures support our expl<strong>an</strong>ationregard<strong>in</strong>g the directed social preference motive of government officials.7. Conclud<strong>in</strong>g RemarksIn this paper, we attempt to show a causal l<strong>in</strong>k between the promotion of officials to r<strong>an</strong>k<strong>in</strong>gpositions <strong>in</strong> high office <strong>an</strong>d <strong>in</strong>frastructure developments <strong>in</strong> their home communes. Us<strong>in</strong>g a fixedeffectmodel on p<strong>an</strong>el data of commune <strong>in</strong>frastructure, we f<strong>in</strong>d evidence of widespread favoritism <strong>in</strong>the construction of different types of <strong>in</strong>frastructure <strong>in</strong>clud<strong>in</strong>g roads, marketplaces, irrigation,schools, radio stations, safe water access <strong>an</strong>d access to the State’s “poor commune supportprogram.” The magnitude of this favoritism depends on the position of the official, the respectiveprov<strong>in</strong>cial environment <strong>an</strong>d the connection between the official <strong>an</strong>d his rural home commune.While middle-r<strong>an</strong>k<strong>in</strong>g officials <strong>in</strong> the Government have signific<strong>an</strong>t ability to exercise favoritism,non-chair members of the legislative National Assembly do not. This power difference is <strong>in</strong> starkcontrast to the politics that we have known <strong>in</strong> democracies. Further, r<strong>an</strong>k<strong>in</strong>g officials withoutformal, hierarchical authority over local budgets c<strong>an</strong> evidently direct resources to their hometownbudgets, suggest<strong>in</strong>g that favoritism is exercised through <strong>in</strong>formal <strong>in</strong>fluence. Communes betterconnected to promoted native officials <strong>an</strong>d <strong>in</strong> prov<strong>in</strong>ces where prov<strong>in</strong>cial leaderships have morediscretionary power tend to reap more benefits from favoritism.We observe that officials target their favors narrowly to their small home communes <strong>in</strong>steadof distribut<strong>in</strong>g them over their whole home districts. The entire population of a commune ispolitically negligible <strong>in</strong> the Vietnamese context, <strong>an</strong>d unlikely to matter to the official’s career. It is41
thus unlikely that the f<strong>in</strong>d<strong>in</strong>gs are due to reverse causation or to strategic behaviors <strong>in</strong> build<strong>in</strong>gpolitical support bases. We also use year- <strong>an</strong>d commune-official fixed effects to elim<strong>in</strong>ate concernsof time-<strong>in</strong>vari<strong>an</strong>t unobservable factors affect<strong>in</strong>g both the promotion <strong>an</strong>d the outcomes. Therefore,the results suggest a form of social preference towards social relatives that prevails <strong>in</strong> environmentswith low tr<strong>an</strong>sparency, high discretionary power on the part of local officials <strong>an</strong>d a strong socialconnection between r<strong>an</strong>k<strong>in</strong>g officials <strong>an</strong>d their relatives along social l<strong>in</strong>es such as ethnicity, race, cl<strong>an</strong>or geographic orig<strong>in</strong>s.The import<strong>an</strong>t question of efficiency has been left out <strong>in</strong> this paper, as it is <strong>in</strong> most relatedstudies. It is not exactly clear how the favoritism pattern identified here affects the efficientallocation of public resources, <strong>an</strong> issue discussed by Hsieh <strong>an</strong>d Klenow (2009). Apart from the<strong>in</strong>tuitive <strong>in</strong>terpretation that it could cause serious misallocations of public resources, one might alsospeculate that officials possess better <strong>in</strong>formation about their home communes <strong>an</strong>d therefore c<strong>an</strong>direct public resources to more efficient use <strong>in</strong> them. This <strong>in</strong>formation ch<strong>an</strong>nel presents aformidable challenge to the broad literature on favoritism <strong>an</strong>d patronage politics. Test<strong>in</strong>g thisefficiency ga<strong>in</strong> or loss represents <strong>an</strong> <strong>in</strong>terest<strong>in</strong>g avenue for future research. In our study, it is unlikelythat favoritism leads to a more efficient use of resources. Even if promoted officials know theircommunes’ needs, it is unlikely that they do better th<strong>an</strong> local budget authorities <strong>in</strong> suggest<strong>in</strong>g moreefficient allocation. Besides, were it to exist, their <strong>in</strong>formation adv<strong>an</strong>tage should have materializedeven before the promotion, <strong>an</strong>d should have spilled over to neighbor<strong>in</strong>g communes as well. Thesetwo predictions are not supported by our empirical results; however, we rema<strong>in</strong> cautious <strong>in</strong> mak<strong>in</strong>gclaims about efficiency.St<strong>an</strong>dard economic theory would predict that marg<strong>in</strong>al <strong>in</strong>centives for corruption, def<strong>in</strong>ed asthe abuse of public office for personal (<strong>in</strong>dividual or close family) ga<strong>in</strong>, will dim<strong>in</strong>ish as officeholders become richer. It implies that <strong>in</strong> the long run, growth <strong>an</strong>d stable politics will reduce42
corruption rates. Our results challenge this view. Because of their will<strong>in</strong>gness to abuse power toch<strong>an</strong>nel public resources to social connections, r<strong>an</strong>k<strong>in</strong>g officials may ma<strong>in</strong>ta<strong>in</strong> <strong>an</strong> appetite forcorruption far beyond their own consumption <strong>an</strong>d accumulation of wealth. This motive offavoritism runs <strong>in</strong>dependently of quid-pro-quo political support, <strong>an</strong>d could thus be present <strong>in</strong>developed countries as well (Hyyt<strong>in</strong>en, Lundberg <strong>an</strong>d Toiv<strong>an</strong>en 2007), although <strong>in</strong> such casespolitical concerns would confound the empirical association between power <strong>an</strong>d favoritism. Sociallymotivated favoritism should be <strong>an</strong> import<strong>an</strong>t consideration <strong>in</strong> design<strong>in</strong>g measures aga<strong>in</strong>st corruptbehaviors on the part of public officials, not only <strong>in</strong> authoritari<strong>an</strong> regimes but also <strong>in</strong> countrieswhere democracy <strong>an</strong>d tr<strong>an</strong>sparency are less th<strong>an</strong> perfect.8. ReferencesAbrevaya, Jason <strong>an</strong>d D<strong>an</strong>iel S. Hamermesh (2012). “Charity <strong>an</strong>d <strong>Favoritism</strong> <strong>in</strong> the Field: AreFemale Economists Nicer (To Each Other)?” Review of Economics <strong>an</strong>d Statistics, 94(1), 202-7.Angelucci, M<strong>an</strong>uela. Giacomo De Giorgi, <strong>an</strong>d Imr<strong>an</strong> Rasul (2012). “Resource <strong>Po</strong>ol<strong>in</strong>g with<strong>in</strong>Family Networks: Insur<strong>an</strong>ce <strong>an</strong>d Investment.” Unpublished paper. University CollegeLondonAngelucci, M<strong>an</strong>uela, Giacomo De Giorgi, Marcos A. R<strong>an</strong>gel, <strong>an</strong>d Imr<strong>an</strong> Rasul (2007).“Extended Family Networks <strong>in</strong> Rural Mexico: A Descriptive Analysis.” In CESifo ConferenceVolume on Institutions <strong>an</strong>d Development, edited by Timothy Besley, <strong>an</strong>d Raji Jayaram<strong>an</strong>. MITPress.B<strong>an</strong>erjee, Abhijit <strong>an</strong>d Roh<strong>in</strong>i Som<strong>an</strong>ath<strong>an</strong> (2007). “The <strong>Po</strong>litical Economy of Public Goods:Some Evidence from India.” Journal of Development Economics, 82(2), 287-314.Batabyal, Amitrajeet A. <strong>an</strong>d Hamid Beladi (2008). “Bribery <strong>an</strong>d <strong>Favoritism</strong> <strong>in</strong> Queu<strong>in</strong>g Modelsof Rationed Resource Allocation.” Journal of Theoretical <strong>Po</strong>litics, 20, 329-38.43
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'' BB (B*,λ)B*' r + '' BB (B*,λ)B*' r =[g'' PP (P*,r)h' B (B*,d)B*' r + g'' Pr (P*,r)]h' B (B*,d) + g' P (P*,r)h'' BB (B*,d)B*' r {'' BB (B*,λ) + '' BB (B*,λ) - g'' PP (P*,r)[h' B (B*,d)] 2 - g' P (P*,r)h'' BB (B*,d)}B*' r =g'' Pr (P*,r)h' B (B*,d).The expression <strong>in</strong> the bracket on the left-h<strong>an</strong>d side is negative while the right-h<strong>an</strong>d side ispositive as g'' Pr (P*,r) < 0 based on the proposition's assumption. Therefore, B*' r must be positive,<strong>in</strong>dicat<strong>in</strong>g that the solution B* is <strong>in</strong>creas<strong>in</strong>g <strong>in</strong> r (QED).(b) The partial differentiation with respect to d from equation (2) yields:'' BB (B*,λ)B*' d + '' BB (B*,λ)B*' d =g'' PP (P*,r)[h' B (B*,d)B*' d + h' d (B*,d)]h' B (B*,d) + g' P (P*,r)[h'' BB (B*,d)B*' d + h'' Bd (B*,d)] {'' BB (B*,λ) + '' BB (B*,λ) - g'' PP (P*,r)[h' B (B*,d)] 2 - g' P (P*,r)h'' BB (B*,d}B*' d =g'' PP (P*,r)h' d (B*,d)h' B (B*,d) + g' P (P*,r)h'' Bd (B*,d).The expression <strong>in</strong> the bracket on the left-h<strong>an</strong>d side is negative while the right-h<strong>an</strong>d side ispositive as h'' Bd (B*,d) > 0 based on the proposition's assumption. Therefore, B*' d must be negative,<strong>in</strong>dicat<strong>in</strong>g that the solution B* is decreas<strong>in</strong>g <strong>in</strong> d (QED.)Proof of Proposition 3: Suppose the marg<strong>in</strong>al benefits are decreas<strong>in</strong>g <strong>in</strong> λ, as <strong>in</strong> the case wheresocial preferences outweigh political supports (the opposite case is proven <strong>an</strong>alogously.) Let λ 1 < λ 2 ,so ' B (B,λ 1 ) + ' B (B,λ 1 ) ≥ ' B (B,λ 2 ) + ' B (B,λ 2 ) for every B, <strong>an</strong>d B 1 * <strong>an</strong>d B 2 * be the correspond<strong>in</strong>gsolutions. We now need to show that B 1 * ≥ B 2 *.Recall from equation (2) that : ' B (B,λ) + ' B (B,λ) = g' P (h(B,d),r)h' B (B,d). Denote thisexpression as M(B). ' B (B,λ) + ' B (B,λ) is decreas<strong>in</strong>g <strong>in</strong> B as + is concave <strong>in</strong> B, while M(B) is<strong>in</strong>creas<strong>in</strong>g <strong>in</strong> B as g <strong>an</strong>d h are convex.49
Assume that B 1 * < B 2 *, then M(B 1 *) = ' B (B 1 *,λ 1 ) + ' B (B 1 *,λ 1 ) ≥ ' B (B 1 *,λ 2 ) + ' B (B 1 *,λ 2 ) ≥' B (B 2 *,λ 2 ) + ' B (B 2 *,λ 2 ) = M(B 2 *), contradictory to M(B)’s <strong>in</strong>creas<strong>in</strong>g <strong>in</strong> B. Therefore, B 1 * ≥ B 2 *(QED).10. Tables <strong>an</strong>d Figures50
P<strong>an</strong>el A. Government officialsOfficial group/subgroupStartyearTable 1. Descriptive statisticsEndyearNo. ofofficialsNo. ofpositions*Average**no. ofpositionsMedi<strong>an</strong>**no. ofpositionsNo. of communesCentral Committee 2002 2011 90 21% 119 18% 2.67 2 86 25%Central Committee 9th 2002 2006 43 10% 43 6% 3.14 3 43 12%Central Committee 10th 2007 2011 76 18% 76 11% 2.82 3 72 21%Central Government 1997 2011 72 17% 102 15% 2.29 2 68 19%Government from 2000 yearbook 1997 2002 23 5% 23 3% 2.65 2 23 7%Government from 2004 yearbook 2003 2007 43 10% 43 6% 2.47 2 42 12%Government from 2009 yearbook 2008 2011 36 9% 36 5% 2.56 2 36 10%Prov<strong>in</strong>cial Government 2000 2010 105 25% 167 25% 1.92 2 97 28%Government from 2000 yearbook 2000 2004 37 9% 37 5% 2.65 3 37 11%Government from 2004 yearbook 2004 2006 67 16% 67 10% 2.19 2 64 18%Government from 2009 yearbook 2006 2010 63 15% 63 9% 1.92 2 61 17%National Assembly 2003 2011 252 60% 290 43% 1.58 1 224 64%National Assembly 11 2003 2007 138 33% 138 20% 1.83 1 130 37%National Assembly 12 2008 2011 152 36% 152 22% 1.70 1 144 41%Total 1997 2011 422 100% 678 100% 1.61 1 351 100%P<strong>an</strong>el B. CommunesCommune statisticsBenchmark sampleVHLSS rural commune population2002 2004 2006 2008 Overall 2002 2004 2006 2008 OverallSample coverageNumber of communes 311 323 328 309 343 2213 2238 2276 2191 2554Number of districts 196 207 208 197 215 556 570 575 582 610Number of prov<strong>in</strong>ces 55 59 59 57 60 55 59 59 57 60Commune statisticsAverage area 26.9 27.0 26.7 29.0 27.4 39.4 35.9 39.7 41.3 39.1Average population 9794 9689 9658 9714 9713 9039 8631 8647 8836 8787Average <strong>in</strong>come 404 435 572 856 565 342 432 574 881 556% with poverty classification 13.2 13.7 14.0 12.6 13.4 19.2 20.9 19.4 18.0 19.4Commune exist<strong>in</strong>g <strong>in</strong>frastructure% with radio station - 81.7 86.9 85.4 84.7 - 77.0 80.7 80.6 79.5% with good quality road 50.8 67.8 73.2 76.7 67.2 43.3 58.5 63.9 69.6 58.9% with preschool - 96.9 98.8 97.4 97.7 - 96.8 96.4 97.7 97.0% with irrigation system - 70.2 70.1 68.5 69.6 - 66.5 67.3 67.2 67.0% with cle<strong>an</strong> water supply 61.4 58.8 58.3 58.0 59.1 61.6 60.8 59.4 61.6 60.8% with market place - 70.0 70.7 68.3 69.7 - 62.2 63.6 62.9 62.9Average politici<strong>an</strong>s per communepromoted this year or the year before 0.13 0.69 0.18 0.63 - - - -promoted/<strong>in</strong> office this year or earlier 0.29 0.77 0.83 1.21 - - - -promoted/<strong>in</strong> office between 2000-10 1.21 1.22 1.21 1.21 1.21 - - - - -Average power capital per commune*** 0.32 1.03 1.21 1.96 1.13 - - - - -from Central Committee positions 0.13 0.12 0.12 0.35 0.18 - - - - -from Central Government positions 0.07 0.20 0.20 0.31 0.19 - - - - -from Prov<strong>in</strong>cial Government positions 0.11 0.32 0.49 0.49 0.35 - - - - -from National Assembly positions 0.00 0.40 0.39 0.82 0.40 - - - - -Note:* Numbers of unique officials & numbers of positions x terms <strong>in</strong> each group/subgroup (each subgroup represents a term)** Average/medi<strong>an</strong> numbers of positions x terms held by <strong>an</strong> official <strong>in</strong> each group/subgroup throughout the 2000-10 period*** <strong>Po</strong>wer capital of a commune <strong>in</strong> a year is the accumulated number of positions x terms held by officials com<strong>in</strong>g from that commune up to
Table 2: Officials' power <strong>an</strong>d home commune <strong>in</strong>frastructureP<strong>an</strong>el A. Ma<strong>in</strong> sampleTime lagDependent variable(1)ImmediateRadio station(2)ImmediateGood road(3)1-year lagPreschool(4)1-year lagIrrigation(5)1-year lagCle<strong>an</strong> Water(6)2-year lagMarketplace<strong>Po</strong>wer Capital 0.0346 0.0620 0.0247 0.0643 0.0485 0.0590(0.0201) * (0.0242) ** (0.0127) * (0.0356) * (0.0197) ** (0.0239) **Commune ave. <strong>in</strong>come 0.0136 0.0356 0.00575 -0.0464 0.0472 0.0124(0.0271) (0.0307) (0.0132) (0.0555) (0.0310) (0.0362)Commune population 0.0522 0.0647 0.0792 0.239 0.0254 0.0884(0.0896) (0.0872) (0.0615) (0.1720) (0.0678) (0.1010)Year FE Yes Yes Yes Yes Yes YesZone FE Yes Yes Yes Yes Yes YesComm-Official FE Yes Yes Yes Yes Yes YesObservations 1,155 1,533 1,157 1,155 1,528 1,157R-squared 0.738 0.578 0.575 0.587 0.726 0.772P<strong>an</strong>el B. Subsamples, exclud<strong>in</strong>g communes that already have correspond<strong>in</strong>g <strong>in</strong>frastructureDependent variable(1)ImmediateRadio station(2)ImmediateGood road(3) (4) (5) (6)1-year lag 1-year lag 1-year lag 2-year lagPreschool Irrigation Cle<strong>an</strong> Water Marketplace<strong>Po</strong>wer Capital 0.161 0.0932 0.318 0.126 0.0886 0.126(0.0885) * (0.0373) ** (0.3090) (0.0650) * (0.0363) ** (0.0563) **Commune ave. <strong>in</strong>come 0.0775 0.0722 0.00238 -0.105 0.0762 0.0158(0.0927) (0.0561) (0.2310) (0.1130) (0.0514) (0.0733)Commune population 0.249 0.113 -0.665 0.337 0.0239 0.435(0.3440) (0.1930) (0.7020) (0.2340) (0.1180) (0.2890)Year FE Yes Yes Yes Yes Yes YesZone FE Yes Yes Yes Yes Yes YesComm-Official FE Yes Yes Yes Yes Yes YesObservations 289 895 59 620 856 473R-squared 0.463 0.426 0.413 0.322 0.441 0.449Note: In this table, we estimate the impact of <strong>an</strong> official's new promotion to a r<strong>an</strong>k<strong>in</strong>g position on the construction of eachtype of <strong>in</strong>frastructure <strong>in</strong> his/her home commune by relat<strong>in</strong>g the number of r<strong>an</strong>k<strong>in</strong>g positions accumulated by the official tothe presence of each <strong>in</strong>frastructure <strong>in</strong> the commune, us<strong>in</strong>g different lags, controll<strong>in</strong>g for commune current average <strong>in</strong>come<strong>an</strong>d population, <strong>an</strong>d <strong>in</strong>clud<strong>in</strong>g year, zone, <strong>an</strong>d commune-official fixed effects. P<strong>an</strong>el A reports salient results for eachdifferent lag on the ma<strong>in</strong> sample. P<strong>an</strong>el B replicates the P<strong>an</strong>el A regressions on a subsample exclud<strong>in</strong>g communes wherethe correspond<strong>in</strong>g <strong>in</strong>frastructure was present throughout the period. P<strong>an</strong>el B reports reports similar salient results fromthese subsamples. Robust st<strong>an</strong>dard errors <strong>in</strong> brackets are clustered at commune-year level. Statistical signific<strong>an</strong>ce is denotedby *** (p < 1%), ** (p < 5%), <strong>an</strong>d * (p < 10%).
Table 3: <strong>Favoritism</strong> <strong>in</strong> other home commune outcomesTime lagDependent variable(1)1-year lagAggregate<strong>in</strong>frastructure(2)Immediate<strong>Po</strong>or communesupport program(3)1-year lagCommuneaverage <strong>in</strong>come(4)1-year lagCommuneaverage expenditure(5)1-year lagCommunepopulation<strong>Po</strong>wer Capital 0.202 0.0169 0.0106 -0.00438 -0.00526(0.0881) ** (0.0083) ** (0.0275) (0.0188) (0.00733)Commune ave. <strong>in</strong>come 0.0520 8.91e-05(0.1420) (0.0203)Commune population 2.281 -0.0932(0.7140) *** (0.0270) ***Year FE Yes Yes Yes Yes YesZone FE Yes Yes Yes Yes YesComOfficial FE Yes Yes Yes YesProv<strong>in</strong>ce FEYesObservations 1,148 1,532 1,542 1,542 1,533R-squared 0.769 0.434 0.688 0.779 0.953Note: This table reports further checks on the effect of a native official's new promotion on other type of outcome variables,<strong>in</strong>clud<strong>in</strong>g commune average <strong>in</strong>come, expenditure, population, <strong>in</strong>clusion <strong>in</strong>to the State's "poor commune support program", <strong>an</strong>daggregate <strong>in</strong>frastructure, most with a one-year lag <strong>an</strong>d controll<strong>in</strong>g for year, zone, <strong>an</strong>d commune-offcial or prov<strong>in</strong>ce fixed effects.Robust st<strong>an</strong>dard errors <strong>in</strong> brackets are clustered at commune-year level. Statistical signific<strong>an</strong>ce is denoted by *** (p < 1%), ** (p< 5%), <strong>an</strong>d * (p < 10%).
P<strong>an</strong>el A: Robustness checks with dependent variable Good roadLagSpecification(1)ImmediateBenchmark(2)ImmediateNo FETable 4: Alternative specifications <strong>an</strong>d robustness checks(3)ImmediateYear FE(4)ImmediateComOfficial FE(5)1-year forwardBenchmark(6)1-year lagBenchmark(7)2-year lagBenchmark(8)ImmediateComposition unit(9)ImmediateCommune unit<strong>Po</strong>wer Capital 0.0620 0.0673 0.0213 0.146 0.110 0.0426 0.0367 0.0563 0.0523(0.0242) ** (0.0125) *** (0.0136) (0.0181) *** (0.0365) *** (0.0245) * (0.0266) (0.0237) ** (0.0214) **<strong>Po</strong>wer K 1-year lead -0.0695(0.0372) *logComAvgInc 0.0356 0.0350 0.0353 0.0366 0.0193 0.0310(0.0307) (0.0306) (0.0308) (0.0307) (0.0351) (0.0294)logCom<strong>Po</strong>p 0.0647 0.0706 0.0654 0.0618 0.0519 0.138(0.0872) (0.0870) (0.0869) (0.0863) (0.0990) (0.0935)Year FE Yes Yes Yes Yes Yes Yes YesZone FE Yes Yes Yes Yes Yes YesComOfficial FE Yes Yes Yes Yes YesCom<strong>Po</strong>sition FEYesCommune FEYesObservations 1,533 1,542 1,542 1,542 1,533 1,533 1,533 2,480 1,262R-squared 0.578 0.018 0.049 0.563 0.580 0.577 0.576 0.570 0.579P<strong>an</strong>el B: Robustness checks with dependent variable Marketplace(1) (2) (3)(4)LagSpecification2-year lagBenchmark2-year lagNo FE2-year lagYear FE2-year lagComOfficial FE(5)1-year forwardBenchmark(6)ImmediateBenchmark(7)1-year lagBenchmark(8)2-year lagComposition unit(9)2-year lagCommune unit<strong>Po</strong>wer Capital 0.0590 0.0252 0.0353 0.00949 -0.0542 -0.0287 0.0284 0.0483 0.0326(0.0239) ** (0.0176) (0.0189) * (0.0188) (0.0424) (0.0272) (0.0233) (0.0195) ** (0.0217)<strong>Po</strong>wer K 1-year lead 0.0315(0.0414)logComAvgInc 0.0124 0.0104 0.0105 0.00980 -0.0170 0.00241(0.0362) (0.0362) (0.0361) (0.0362) (0.0390) (0.0359)logCom<strong>Po</strong>p 0.0884 0.0950 0.0965 0.0959 0.0369 0.136(0.1010) (0.1020) (0.1020) (0.1010) (0.0932) (0.1210)Year FE Yes Yes Yes Yes Yes Yes YesZone FE Yes Yes Yes Yes Yes YesComOfficial FE Yes Yes Yes Yes YesCom<strong>Po</strong>sition FEYesCommune FEYesObservations 1,157 1,166 1,166 1,166 1,157 1,157 1,157 1,870 951R-squared 0.772 0.002 0.002 0.765 0.771 0.771 0.771 0.765 0.778Note: P<strong>an</strong>el A explores the effect of a native official's new promotion on local Good road under various specifications, <strong>in</strong>clud<strong>in</strong>g us<strong>in</strong>g different controls <strong>an</strong>d fixed effects,with different lags, <strong>an</strong>d us<strong>in</strong>g different observation units. P<strong>an</strong>el B explores the effect of a native politici<strong>an</strong>'s new promotion on presence of commune Marketplaces undervarious specifications, <strong>in</strong>clud<strong>in</strong>g us<strong>in</strong>g different controls <strong>an</strong>d fixed effects, with different lags, <strong>an</strong>d us<strong>in</strong>g different observation units. Robust st<strong>an</strong>dard errors <strong>in</strong> brackets areclustered at commune-year level. Statistical signific<strong>an</strong>ce is denoted by *** (p < 1%), ** (p < 5%), <strong>an</strong>d * (p < 10%).
Table 5: <strong>Favoritism</strong> by different level of real budget authoritySubsample(1)Benchmark(2)Non-chairedNationalAssembly(3)AllNationalAssembly(4)NonNationalAssembly(5)CentralGovernment(6)Prov<strong>in</strong>cialGovernment(7)Central &Prov<strong>in</strong>cialGovernment(8)Mediumr<strong>an</strong>k<strong>in</strong>gofficials<strong>Po</strong>wer Capital 0.0620 0.0189 0.0281 0.1000 0.173 0.0824 0.0930 0.0715(0.0242) ** (0.0471) (0.0467) (0.0333) *** (0.0792) ** (0.0597) (0.0441) ** (0.0358) **Commune ave. <strong>in</strong>come 0.0356 0.0109 0.0107 0.0327 0.0261 0.0606 0.0481 0.0422(0.0307) (0.0382) (0.0376) (0.0391) (0.0886) (0.0490) (0.0446) (0.0398)Commune population 0.0647 0.0431 0.0280 0.0031 0.0234 0.0697 0.0484 0.0424(0.0872) (0.1180) (0.1230) (0.1020) (0.1150) (0.1670) (0.1070) (0.1040)Year FE Yes Yes Yes Yes Yes Yes Yes YesZone FE Yes Yes Yes Yes Yes Yes Yes YesComm-Official FE Yes Yes Yes Yes Yes Yes Yes YesObservations 1,533 861 904 829 267 393 648 832R-squared 0.578 0.582 0.574 0.6020 0.558 0.602 0.579 0.582Note: This table reports benchmark regression results for key outcome variable Good road us<strong>in</strong>g subsamples divided by different groups ofVietnamese political elites, <strong>in</strong>clud<strong>in</strong>g non-chaired National Assembly positions, all National Assembly positions, non-National Assembly positions,Central Government poitions, Prov<strong>in</strong>cial Governments positions, <strong>an</strong>d medium-r<strong>an</strong>k<strong>in</strong>g positions (i.e. m<strong>in</strong>isters, deputy m<strong>in</strong>isters, <strong>an</strong>d theequivalent, prov<strong>in</strong>cial leaders, <strong>an</strong>d ord<strong>in</strong>ary members of the Central Committee). Robust st<strong>an</strong>dard errors <strong>in</strong> brackets are clustered at commune-yearlevel. Statistical signific<strong>an</strong>ce is denoted by *** (p < 1%), ** (p < 5%), <strong>an</strong>d * (p < 10%).
Table 6: <strong>Favoritism</strong> by the flexibility of the prov<strong>in</strong>cial <strong>in</strong>stitutional environmentP<strong>an</strong>el A: Subsample of communes <strong>in</strong> prov<strong>in</strong>ces with above-medi<strong>an</strong> PDP scoresTime lagDependent variable(1)ImmediateRadio station(2)ImmediateGood road(3)1-year lagPreschool(4)1-year lagIrrigation(5)1-year lagCle<strong>an</strong> Water(6)2-year lagMarketplace<strong>Po</strong>wer Capital 0.0629 0.0710 0.0226 0.0762 0.0474 0.0853(0.0311) ** (0.0319) ** (0.0216) (0.0536) (0.0281) * (0.0379) **Commune ave. <strong>in</strong>com 0.0270 0.0190 -0.00474 0.0198 0.0509 0.00119(0.0361) (0.0388) (0.0124) (0.0835) (0.0400) (0.0450)Commune population 0.107 0.0815 0.0218 0.300 0.0159 0.0185(0.0981) (0.1300) (0.0266) (0.2490) (0.1180) (0.1030)Year FE Yes Yes Yes Yes Yes YesZone FE Yes Yes Yes Yes Yes YesComm-Official FE Yes Yes Yes Yes Yes YesObservations 606 798 608 607 793 608R-squared 0.705 0.581 0.535 0.560 0.657 0.768P<strong>an</strong>el B: Subsample of communes <strong>in</strong> prov<strong>in</strong>ces with below-medi<strong>an</strong> PDP scoresTime lagDependent variable(1)ImmediateRadio station(2)ImmediateGood road(3)1-year lagPreschool(4)1-year lagIrrigation(5)1-year lagCle<strong>an</strong> Water(6)2-year lagMarketplace<strong>Po</strong>wer Capital 0.00858 0.0496 0.0226 0.0626 0.0500 0.0342(0.0262) (0.0364) (0.0158) (0.0484) (0.0279) * (0.0297)Commune ave. <strong>in</strong>com 0.0154 0.0645 0.0169 -0.134 0.0457 0.0318(0.0374) (0.0473) (0.0266) (0.0621) ** (0.0490) (0.0562)Commune population -0.0771 -0.00204 0.151 0.260 0.0368 0.195(0.1740) (0.1190) (0.1180) (0.1970) (0.0741) (0.1910)Year FE Yes Yes Yes Yes Yes YesZone FE Yes Yes Yes Yes Yes YesComm-Official FE Yes Yes Yes Yes Yes YesObservations 549 735 549 548 735 549R-squared 0.781 0.592 0.625 0.639 0.790 0.785Note: In this table, P<strong>an</strong>el A reports the benchmark regression results for the subsample of communes <strong>in</strong> prov<strong>in</strong>ces whereprov<strong>in</strong>cial leaderships have more discretionary power, as measured by the Prov<strong>in</strong>cial Discretionary <strong>Po</strong>licies ' scores (PDP). P<strong>an</strong>el Breports the benchmark regression results for the subsample of communes <strong>in</strong> prov<strong>in</strong>ces where prov<strong>in</strong>cial leaderships have lessdiscretionary power, as measured by the prov<strong>in</strong>ces' PDP scores. Robust st<strong>an</strong>dard errors <strong>in</strong> brackets are clustered at communeyearlevel. Statistical signific<strong>an</strong>ce is denoted by *** (p < 1%), ** (p < 5%), <strong>an</strong>d * (p < 10%).
Time lagDependent variableTable 7: <strong>Favoritism</strong> for home districtP<strong>an</strong>el A: Sample <strong>in</strong> which r<strong>an</strong>k<strong>in</strong>g officials are matched to their home districts(1)ImmediateRadio station(2)ImmediateGood road(3) (4)1-year lag 1-year lagPreschool Irrigation(5)1-year lagCle<strong>an</strong> Water(6)2-year lagMarketplace<strong>Po</strong>wer Capital -0.00534 0.00106 -0.000263 0.00349 0.00985 0.00471(0.0065) (0.0073) (0.0050) (0.0125) (0.0093) (0.0089)Commune ave. <strong>in</strong>come -0.00680 0.0343 -0.00312 0.0329 -0.0327 0.0479(0.0255) (0.0327) (0.0180) (0.0375) (0.0367) (0.0350)Commune population 0.0180 0.0560 0.0285 -0.0197 -0.0867 0.0859(0.0334) (0.0516) (0.0425) (0.0370) (0.0391) ** (0.0507) *Year FE Yes Yes Yes Yes Yes YesZone FE Yes Yes Yes Yes Yes YesComm-Official FE Yes Yes Yes Yes Yes YesObservations 3,963 4,693 3,963 3,963 4,694 3,963R-squared 0.827 0.740 0.578 0.704 0.807 0.781P<strong>an</strong>el B: Sample <strong>in</strong> which r<strong>an</strong>k<strong>in</strong>g officials are matched to other communes <strong>in</strong> their home districtsTime lagDependent variable(1) (2) (3) (4) (5)Immediate Immediate 1-year lag 1-year lag 1-year lagRadio station Good road Preschool Irrigation Cle<strong>an</strong> Water(6)2-year lagMarketplace<strong>Po</strong>wer Capital -0.00571 0.00731 0.00292 0.00998 -0.00213 -0.00222(0.0050) (0.0067) (0.0039) (0.0096) (0.0054) (0.0071)Commune ave. <strong>in</strong>come 0.00862 -0.0104 -0.000589 -0.000334 0.00872 -0.0156(0.0106) (0.0176) (0.0093) (0.0220) (0.0169) (0.0163)Commune population 0.00790 0.0412 -0.0378 0.00230 0.0119 0.0563(0.0767) (0.0387) (0.0562) (0.0874) (0.0366) (0.1020)Year FE Yes Yes Yes Yes Yes YesZone FE Yes Yes Yes Yes Yes YesComm-Official FE Yes Yes Yes Yes Yes YesObservations 17,620 23,548 17,632 17,605 23,535 17,632R-squared 0.714 0.577 0.514 0.621 0.729 0.768Note: In this table, P<strong>an</strong>el A reports the benchmark regression results us<strong>in</strong>g a sample <strong>in</strong> which each observationcomb<strong>in</strong>es a r<strong>an</strong>k<strong>in</strong>g official, his/her home district, <strong>an</strong>d a year. The outcome variables are calculated as the averageover the surveyed communes <strong>in</strong> that district. These regressions estimate the impact of <strong>an</strong> official's new promotionon <strong>in</strong>frastructure construction <strong>in</strong> his/her home district. P<strong>an</strong>el B reports the benchmark regression results us<strong>in</strong>g asample <strong>in</strong> which each observation comb<strong>in</strong>es a r<strong>an</strong>k<strong>in</strong>g official, a commune <strong>in</strong> his/her home district that is nothis/her home commune, <strong>an</strong>d a year. These regressions estimate the impact of <strong>an</strong> official’s new promotion on<strong>in</strong>frastructure construction <strong>in</strong> other communes <strong>in</strong> his/her home district. Robust st<strong>an</strong>dard errors <strong>in</strong> brackets areclustered at commune-year level. Statistical signific<strong>an</strong>ce is denoted by *** (p < 1%), ** (p < 5%), <strong>an</strong>d * (p < 10%).
Table 8: <strong>Favoritism</strong> by age gaps between r<strong>an</strong>k<strong>in</strong>g officials <strong>an</strong>d home communes' chairsP<strong>an</strong>el A: Subsample of r<strong>an</strong>k<strong>in</strong>g officials <strong>an</strong>d home communes' chairs whose age gaps are below medi<strong>an</strong>(1)(2)(3)(4)(5)(6)Time lag Immediate Immediate 1-year lag 1-year lag 1-year lag 2-year lagDependent variable Radio station Good road Preschool Irrigation Cle<strong>an</strong> Water Marketplace<strong>Po</strong>wer Capital 0.0427 0.101 0.0160 0.0673 0.0411 0.0608(0.0300) (0.0372) *** (0.0155) (0.0551) (0.0265) (0.0441)Commune ave. <strong>in</strong>come 0.0724 0.0337 -0.00697 0.000300 0.0378 0.00922(0.0380) * (0.0534) (0.0188) (0.0638) (0.0518) (0.0568)Commune population 0.246 0.117 -0.0495 0.414 -0.102 0.100(0.1670) (0.1060) (0.0377) (0.2490) * (0.0754) (0.1840)Year FE Yes Yes Yes Yes Yes YesZone FE Yes Yes Yes Yes Yes YesComm-Official FE Yes Yes Yes Yes Yes YesObservations 561 778 561 561 775 561R-squared 0.836 0.662 0.636 0.667 0.784 0.801P<strong>an</strong>el B: Subsample of r<strong>an</strong>k<strong>in</strong>g officials <strong>an</strong>d home communes' chairs whose age gaps are above medi<strong>an</strong>(1)(2)(3)(4)(5)(6)Time lag Immediate Immediate 1-year lag 1-year lag 1-year lag 2-year lagDependent variable Radio station Good road Preschool Irrigation Cle<strong>an</strong> Water Marketplace<strong>Po</strong>wer Capital 0.0122 0.0679 0.0197 0.0446 0.0438 -0.000900(0.0278) (0.0379) * (0.0248) (0.0634) (0.0388) (0.0411)Commune ave. <strong>in</strong>come -0.0811 0.00674 0.0147 -0.101 0.107 -0.00189(0.0470) * (0.0489) (0.0247) (0.1100) (0.0508) ** (0.0494)Commune population -0.0796 0.00194 0.111 0.0879 0.0921 -0.0335(0.1320) (0.1610) (0.0943) (0.2380) (0.1320) (0.1230)Year FE Yes Yes Yes Yes Yes YesZone FE Yes Yes Yes Yes Yes YesComm-Official FE Yes Yes Yes Yes Yes YesObservations 594 755 596 594 753 596R-squared 0.779 0.645 0.637 0.656 0.765 0.818Note: In this table, P<strong>an</strong>el A reports the benchmark regression results for the subsample of r<strong>an</strong>k<strong>in</strong>g officials who are more likely tohave close relationships with their home communes' leaderships, as measured by the age gaps between the officials <strong>an</strong>d their homecommunes' chairs (i.e., age gaps of 9 <strong>an</strong>d below). P<strong>an</strong>el B reports the benchmark regression results for the subsample of rak<strong>in</strong>gofficials who are less likely to have close relationships with their home communes' leaderships, as measured by the age gaps betweenthe officials <strong>an</strong>d their home communes' chairs (i.e., age gaps of 10 <strong>an</strong>d above). Robust st<strong>an</strong>dard errors <strong>in</strong> brackets are clustered atcommune-year level. Statistical signific<strong>an</strong>ce is denoted by *** (p < 1%), ** (p < 5%), <strong>an</strong>d * (p < 10%).
Figure 1: Model solution of favored allocation B*Mag<strong>in</strong>al cost/benefit^′ ()+^′ ()B 1B 2B*〖g′〗_P (h(B,d),r) 〖h′〗_B (B,d)BNote: This figure illustrates Propositions 1 to 3. Two key functions of the favored allocation B, namely the positive <strong>an</strong>d negative parts <strong>in</strong> equation (2), arerepresented by a downward slop<strong>in</strong>g marg<strong>in</strong>al benefit curve <strong>an</strong>d <strong>an</strong> upward slop<strong>in</strong>g “pseudo-marg<strong>in</strong>al” cost curve . The two must <strong>in</strong>tersect at the uniquesolution B*. An <strong>in</strong>crease <strong>in</strong> r or d raises the pseudo-marg<strong>in</strong>al cost curve, thus reduces B* to B1. On the other h<strong>an</strong>d, <strong>an</strong> <strong>in</strong>crease <strong>in</strong> either political or socialpayoff pushes the marg<strong>in</strong>al benefit curve up, <strong>an</strong>d moves B* to B2.
Figure 2: Effects of a native official's new promotion by commune per capita <strong>in</strong>come <strong>in</strong> 2002P<strong>an</strong>el A. Effect on village road, plotted by <strong>in</strong>come per capitaEffect on Village road-0.20 -0.10 0.00 0.10 0.20g p y p pLocal l<strong>in</strong>ear regression results <strong>an</strong>d 95% confidence <strong>in</strong>tervals4 5 6 7 8 9Log(Income per capita)Ep<strong>an</strong>echnikov kernel, b<strong>an</strong>dwidth = .5 r<strong>an</strong>ge.P<strong>an</strong>el B. Effect on marketplace, plotted by <strong>in</strong>come per capitaLocal l<strong>in</strong>ear regression results <strong>an</strong>d 95% confidence <strong>in</strong>tervalsyEffect on Commune market-0.30 -0.20 -0.10 0.00 0.104 5 6 7 8 9Log(Income per capita)Ep<strong>an</strong>echnikov kernel, b<strong>an</strong>dwidth = .5 r<strong>an</strong>ge.Note: These graphs show the effects of a native official's new promotion on Good road <strong>an</strong>d marketplace - by communeaverage <strong>in</strong>come <strong>in</strong> 2002 from non-parametric regression, exclud<strong>in</strong>g from the sample communes already hav<strong>in</strong>g the publicservice (good village road or market place) throughout the period.
Figure 3: Effects of a native official's new promotion by commune population <strong>in</strong> 2002P<strong>an</strong>el A. Effect on village road, plotted by population sizeEffect on Village road-0.05 0.00 0.05 0.10 0.15 0.20g , p y pLocal l<strong>in</strong>ear regression results <strong>an</strong>d 95% confidence <strong>in</strong>tervals7 8 9 10 11Log(<strong>Po</strong>pulation size)Ep<strong>an</strong>echnikov kernel, b<strong>an</strong>dwidth = .5 r<strong>an</strong>ge.P<strong>an</strong>el B. Effect on marketplace, plotted by population p size y pLocal l<strong>in</strong>ear regression results <strong>an</strong>d 95% confidence <strong>in</strong>tervalsEffect on Commune market-0.20 -0.10 0.00 0.10 0.207 8 9 10 11Log(<strong>Po</strong>pulation size)Ep<strong>an</strong>echnikov kernel, b<strong>an</strong>dwidth = .5 r<strong>an</strong>ge.Note: These graphs show the effects of a native official's new promotion on good village road <strong>an</strong>d marketplace - bycommune population <strong>in</strong> 2002 from non-parametric regression, exclud<strong>in</strong>g from the sample communes already hav<strong>in</strong>g thepublic service (good village road or marketplace) throughout the period.