Economics Seminar- Mustafa Kaba

KOÇ UNIVERSITY FACULTY OF ADMINISTRATIVE SCIENCES AND ECONOMICS ECONOMICS SEMINAR Speaker: Mustafa Kaba - Max Planck Institute for Research on Collective Goods in Bonn, Germany Title: From Elected to Appointed: The Economic Consequences of Local Authoritarian Takeovers Date: 09 January 2024- Tuesday Location: CASE 127 Time: 17:30-18:45 Abstract: This paper investigates the impact of authoritarian takeovers on the rule of law and economic efficiency in local jurisdictions. Authoritarian takeovers refer to the replacement of elected officials with centrally appointed representatives. Using the universe of state contracts in Turkey and a staggered Difference-in-Differences (DiD) design, we show how authoritarian takeovers deteriorate the rule of law and reduce economic efficiency in public procurement. Notably, centrally appointed mayors use competitive auctions at a rate nearly half that of elected mayors and instead exploit legal provisions almost three times as often. Such practices inflate contract prices by 24% and reduce value for money by 40%, causing waste equivalent to 6% of procurement spending in the affected municipalities. These results are robust to various tests, including Regression Discontinuity (RD) estimation. Probing the underlying mechanisms, we find evidence for diminished local accountability driving these effects. By contrast, we do not find evidence for either the coordination benefits from a more centralized governance or politicians’ discretion leading to quality improvements in procurement. In an era of global autocratization, our subnational evidence on authoritarian takeovers underscores the instrumental value of democracy.

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