Why do Autocrats Disclose? -...

Why do Autocrats Disclose?

James R. Hollyer B. Peter Rosendorff James Raymond Vreeland

Minnesota/Princeton

NYU

Georgetown

December 14, 2015

HRV (Minnesota,NYU,Georgetown) Autocratic Transparency December 14, 2015

Question and Motivation Qustion and Preview

Question

When and why do autocratic governments disclose information(particularly economic information) to their publics?

Note: We will use the terms disclosure and transparency interchangeably



The Larger (Book) Project

1 Intro2 The HRV Index of Transparency

I apply an item response model to missing data from WDI, 125countries, 1980-2010

I Hollyer, Rosendorff & Vreeland (2014). Political Analysis.

3 Transparency and Investment

I lowers uncertainty for risk averse investors, signals pro-investmentpolicy

I increases in capital formation, fixed capital formation and FDI

4 Democracies Disclose More

I improves welfare, enables efficient economic decision-makingI democracy induces leaders to care more about citizen welfareI Hollyer, Rosendorff & Vreeland (2011). JOP





























3 Transparency and InvestmentI lowers uncertainty for risk averse investors, signals pro-investment

policyI increases in capital formation, fixed capital formation and FDI





















4 Democracies Disclose MoreI improves welfare, enables efficient economic decision-makingI democracy induces leaders to care more about citizen welfareI Hollyer, Rosendorff & Vreeland (2011). JOP



The Larger (Book) Project, cnt’d

1 Intro

2 The HRV Index of Transparency



5 Transparency and Regime Transition: Theory

I in aut.: facilitates common belief formation and coordination of protestI in dem: improves functioning of elections, reduces incentives to

overthrow regime

6 Transparency and Regime Transition: Empirics

I increases hazard of dem. transition, reduces hazard of dem. collapseI Hollyer, Rosendorff & Vreeland (2015) APSR; (2015) ‘Transparency,

Protest and Democratic Stability’

7 Why Do Autocrats Disclose?




1 Intro



4 Democracies Disclose More5 Transparency and Regime Transition: Theory


overthrow regime








1 Intro





overthrow regime








1 Intro





overthrow regime

6 Transparency and Regime Transition: EmpiricsI increases hazard of dem. transition, reduces hazard of dem. collapseI Hollyer, Rosendorff & Vreeland (2015) APSR; (2015) ‘Transparency,






1 Intro





overthrow regime







1 Intro





overthrow regime






FindingsStylized Facts:

transparent autocratic regimes more prone to collapse via mass unrestor dem’ization

but, are less prone to collapse due to coups

Argument: Autocratic leaders disclose because it insulates them fromthreats that emerge from within their regimes

in part, this is because transparency facilitates mass mobilization

in part, because transparency encourages FDI, increasing rents fromelite membership

Leaders disclose when threats from within regime are high relative to thosefrom populace

institutionalized regimes – competing power bases, designatedsuccession mechanisms

leaders new to office













































































leaders new to officeHRV (Minnesota,NYU,Georgetown) Autocratic Transparency December 14, 2015


Findings, cnt’d

Demonstrate that in autocracies:

1 disclosure more frequent in institutionalized regimes and less frequentin personalistic ones

2 leaders disclose more readily when new to office

3 transparency associated with increased net FDI inflows



Findings, cnt’d







Findings, cnt’d







Findings, cnt’d






Question and Motivation Motivation

Theoretical Priors

Autocratic leaders face two threats to rule:

1 displacement by regime members (e.g., coup)

2 displacement of regime – including the leader (e.g., by mass unrest)

Steps by elites to replace leader increase regime instability



Theoretical Priors

Autocratic leaders face two threats to rule:

1 displacement by regime members (e.g., coup)

2 displacement of regime – including the leader (e.g., by mass unrest)

Steps by elites to replace leader increase regime instability



Pacifying the Regime

Leaders may have an incentive to insulate themselves from accountabilityto elite:

Two Mechanisms:

1 increase rents flowing to regime members

2 increase external threat

Transparency achieves both ends

1 ease mobilization by members of the public

2 encourage investment (particularly FDI)





Two Mechanisms:










Two Mechanisms:










Two Mechanisms:










Two Mechanisms:










Two Mechanisms:







Model Primitives

Model Primitives

Actors: an autocratic leader LRegime Elites R and an Opposition O

Actions: L chooses d ∈ {0, 1}and a policy variable et ∈ {0, 1}R chooses v ∈ {0, 1}

Typespace: L is of type θ ∈ {0, 1}θ = 1 denotes a ‘convergent’ typeθ = 0 denotes a ‘divergent’ typePr(θ = 1) = π

State Space: st ∈ {0, 1}, Pr(st = 1) = 12

Timing: t ∈ {1, 2}


Model Primitives

Effects of DisclosurePrimitive assumption that disclose increases O’s mobilizational capacity.

Denote pr. O displaces R absent leader removal as p(d)

p(1) > p(0)

ρ ≡ p(1)− p(0)

ω ∈ (1, 1p(1)) represents effect of regime discord on stability

risk of regime collapse given by ωp(d) following removal of Lω declines with institutionalization, rises with leader’s time in office

Primitive assumption that disclosure increases investment:.

Denote potential pool of rents as y(d):

y(1) > y(0)

ψ ≡ y(1)− y(0)


Model Primitives



p(1) > p(0)

ρ ≡ p(1)− p(0)





y(1) > y(0)

ψ ≡ y(1)− y(0)


Model Primitives



p(1) > p(0)

ρ ≡ p(1)− p(0)


risk of regime collapse given by ωp(d) following removal of L

ω declines with institutionalization, rises with leader’s time in office



y(1) > y(0)

ψ ≡ y(1)− y(0)


Model Primitives



p(1) > p(0)

ρ ≡ p(1)− p(0)





y(1) > y(0)

ψ ≡ y(1)− y(0)


Model Primitives



p(1) > p(0)

ρ ≡ p(1)− p(0)





y(1) > y(0)

ψ ≡ y(1)− y(0)


Model Primitives



p(1) > p(0)

ρ ≡ p(1)− p(0)





y(1) > y(0)

ψ ≡ y(1)− y(0)


Model Primitives

Utilities of Citizens

uR,t(et , st , d) =

{It [∆ + λy(d)] + (1− It)(1− λ)y(d) if et = stItλy(d) + (1− It)(1− λ)y(d) otherwise

uO,t(et , st , d) =

{It(1− λ)y(d) + (1− It)[∆ + λy(d)] if et = stIt(1− λ)y(d) + (1− It)λy(d) otherwise.

where

It =

{1 if R is in power0 otherwise.

and λ ∈ (12 , 1), ∆ > 0.


Model Primitives

Utilities of Leaders

uL,t(et , st , d ; θ) =

∆ + λy(d) if et = st and in powerλy(d) if et 6= st , θ = 1 and in powerrt + λy(d) if et 6= st , θ = 0 and in power0 if out of power.

Where rt is drawn from cdf G (.), and G (∆) = 0. E [rt ] = µ.


Model Primitives

Game Form1 Nature draws the the leader’s type θ ∈ {0, 1}, the state variable s1

and the value of rents r1, which are revealed to the leader but not toany citizen.

2 The leader chooses d ∈ {0, 1} and the value of e13 R observes the choice of d and the realization of the policy outcome.

It chooses v ∈ {0, 1}.4 A contest for power between R and O takes place. O prevails with

probability p(d) if the leader was previously retained and withprobability ωp(d) if the leader was previously removed.

5 a If O prevails, it is in power in round 2 and a new leader is chosen byNature. This leader is of type θ = 1 with probability π.

b If R prevails after ousting the leader, a new leader is chosen by Nature.This leader is of type θ = 1 with probability π.

c Otherwise, L remains in office.6 Nature chooses values of s2 and r2.7 The sitting leader chooses e2. All payoffs are realized and the game

ends.HRV (Minnesota,NYU,Georgetown) Autocratic Transparency December 14, 2015

Model Equilibrium

Equilibrium Concept

We characterize a perfect Bayesian equlibrium to this game

which satisfies the intuitive criterion (Cho and Kreps, 1987)

and in which R anticipates convergent types act on their primitiveinterests over disclosure


Model Equilibrium

Equilibrium Concept





Model Equilibrium

Equilibrium Concept





Model Equilibrium

Stability Thresholds

R has a dominant strategy to set v = 0 if π∆ < p(d)y(d)(ω−1)(2λ−1)1−ωp(d)

Implicitly define ω̄ and ω s.t.:

π∆ =p(0)y(0)(ω̄ − 1)(2λ− 1)

1− ω̄p(0)

π∆ =p(1)y(1)(ω − 1)(2λ− 1)

1− ωp(1).

if ω > ω̄ no internal threat to leader

if ω < ω always an internal threat to leader

if ω ∈ [ω, ω̄] a threat absent disclose, but no threat given disclosure


Model Equilibrium




π∆ =p(0)y(0)(ω̄ − 1)(2λ− 1)

1− ω̄p(0)

π∆ =p(1)y(1)(ω − 1)(2λ− 1)

1− ωp(1).





Model Equilibrium




π∆ =p(0)y(0)(ω̄ − 1)(2λ− 1)

1− ω̄p(0)

π∆ =p(1)y(1)(ω − 1)(2λ− 1)

1− ωp(1).





Model Equilibrium




π∆ =p(0)y(0)(ω̄ − 1)(2λ− 1)

1− ω̄p(0)

π∆ =p(1)y(1)(ω − 1)(2λ− 1)

1− ωp(1).





Model Equilibrium

Equilibrium Disclosure

Proposition

The equilibrium strategy over disclosure can be characterized in thefollowing manner:

For ψ > ψ̄, d = 1 for all θ ∈ {0, 1}.For ψ ∈ [ψ, ψ̄], d = 0 iff θ = 0 and ω > ω̄.

For ψ < ψ d = 0 for all θ = 1. For θ = 0:I d = 0 for ω > ω̄.I d = 1 for ω ∈ [ω, ω̄] iff r1 > ∆ + ρ[µ+ λy(0)]− [2− p(1)]λψ.I d = 1 for ω < ω iff r1 > ∆− λψ + [1− p(0)][µ+ λy(0)]


Model Comparative Statics

Investment and Disclosure

Proposition

Equilibrium disclosure is rising in the economic returns to transparency ψ.

straightforward intuition: higher economic benefits leads to higherdisclosure

important empirical implication: transparency should be associatedwith increased investment

I both due to a causal effect (it is assumed that ψ > 0)I and an endogenous equilibrium effect (↑ of ψ yield ↑ disclosure)




Proposition








Proposition







Institutions and Disclosure

Proposition

Leaders disclose for a wider range of values when the consequences ofleader removal for stability are low (ω ≤ ω̄) than when these consequencesare high (ω > ω̄).

greater disclosure in institutionalized than personalistic regimes

greater disclosure under new leaders than under entrenched leaders

Skip to Conclusion Skip to Results


Empirics Evidence on Coups and Revolt

Mass Revolts and Democratization vs. Coups


Empirics Data

Data Definitions

Test these predictions using:

HRV Transparency Index (HRV, 2014) as a measure of disclosure ofeconomic info

Two datasets on autocratic institutionsI GWF – party, personalistic, and military (and monarchies)I DD dataset – singleparty, multiparty, elected legislatures

PWT 7.1 economic data

UNCTAD data on FDI inflows (current USD)

Svolik (2012) for definitions of regimes and leaders’ time in office

Standardize all covariates that aren’t either indicators or time counts


Empirics Who Discloses?

Empirical Model

Varying intercepts hierarchical model:

transparencyi ,t = ρtransparencyi ,t−1 + αi + Xi,t−1β + εi ,t

αi ∼ N(Ziγ, σ2α)

Zi denotes time invariant institutional characteristics

Xi ,t−1 denotes ec. data, leader time in office, cubic polynomial of time

i is an autocratic regime (some of which are quite short-lived)

Estimate via MCMC

Skip to Results



Bias in LDV Varying Intercepts Models

To deal with bias, we estimate the following system of equations:

∆transparencyi ,t−1 = µ+ ζtransparencyi ,t−2 + ∆Xi,t−1ψ + νi ,t−1

∆transparencyi ,t = ρ̂∆ ˆtransparency i ,t−1 + ∆Xi,t−1β̂ + ηi ,t

transparencyi ,t = αi + ρ̂transparencyi ,t−1 + Xi,t−1β̂ + εi ,t

αi ∼ N(Ziγ, σα)

Similar results, somewhat inflated standard errors



Who Discloses?: Results w. GWF Data

LDV ModelsModel 1 Model 2 Model 3

Party 0.002 0.002 0.002[-0.033, 0.038] [-0.039, 0.031] [-0.037, 0.036]

Personal -0.039 -0.038 -0.044[-0.083, -0.001] [-0.085, -0.007] [-0.087, -0.008]

Fuel Exporter -0.037 -0.036 -0.033[-0.082, 0.010] [-0.073, 0.006] [-0.070, 0.008]

Lag Transparency 0.960 0.961 0.964[0.943, 0.978] [0.943, 0.977] [0.947, 0.980]

New Leader 0.023 0.024 0.024[-4×10−4, 0.047] [0.001, 0.048] [0.002, 0.049]

# Obs 1530 1530 1530# Regimes 119 119 119

Ec. controls and cubic polynomial of time included in all specifications

Skip to FDI Skip to Conclusion



New Leader Marginal Effect

Figure: Marginal Effect of a New Leader

2 4 6 8 10

0.00

0.05

0.10

0.15

0.20

0.25

0.30

Marginal Effect of New Leadership

Time (in years)

Cha

nge

in H

RV

Sco

re (

Sta

ndar

d D

evia

tions

)


Empirics Disclosure and FDI

Empirical Model

Varying Intercepts Hierarchical Model:

FDIi ,t = αi + ρFDIi ,t−1 + γtransparencyi ,t−1 + Xi,t−1β + εi ,t

Estimated via MCMC

Nickell bias less of an issue here:

i denotes a country, rather than a regime, so long panels

GMM estimates from Stata return substantively similar results(slightly higher standard errors)

same with fixed-effects LSDV models (slightly larger point estimates)



Empirical Model

Varying Intercepts Hierarchical Model:

FDIi ,t = αi + ρFDIi ,t−1 + γtransparencyi ,t−1 + Xi,t−1β + εi ,t

Estimated via MCMC

Nickell bias less of an issue here:

i denotes a country, rather than a regime, so long panels

GMM estimates from Stata return substantively similar results(slightly higher standard errors)

same with fixed-effects LSDV models (slightly larger point estimates)



Estimated Marginal Effects

2 4 6 8 10 12 14

050

010

0015

00

Marginal Effect of Transparency

Time (in years)

Cha

nge

in F

DI I

nflo

ws

(Mill

ions

US

D)

$198 million-1.2 billion long term ↑ in annual FDI flows (point est. $700million.).


Conclusion

Conclusion

Construct a model of disclosure consistent with existing empirical findings

transparency increases the risk of mass mobilization

and reduces the risk of coup

Novel argument that autocratic leaders may gain from deliberatelydestabilizing the regime


Conclusion

Conclusion

Construct a model of disclosure consistent with existing empirical findings

transparency increases the risk of mass mobilization

and reduces the risk of coup

Novel argument that autocratic leaders may gain from deliberatelydestabilizing the regime


Conclusion

Conclusion

Demonstrate that:

1 newly installed leaders more likely to disclose

2 institutionalized autocracies (not personalistic, presence of electedlegislatures) more likely to disclose



Conclusion

Conclusion

Demonstrate that:





Conclusion

Conclusion

Demonstrate that:





Conclusion

Conclusion

Demonstrate that:





Extra Slides Examples

One Tool to Pacify Regime: Increased FDI

Transparency as part of broader attempts to increase size of pool for rentsfunneled to regime members


Extra Slides Examples

Another Tool to Pacify the Regime: Facilitate MassMobilization


Extra Slides Measurement Model

Transparency as Missing Data

World Development Indicators (Downloaded Dec. 2012)

Items: 240 variables from across WDIrecoded into indicator {0, 1} equal to 1 if non-missing

Panels: 125 countries

Time: Annual obs., 1980-2010

3875 observations


Extra Slides Measurement Model

Measurement ModelItem Response Model

240 equations of the form:

Pr(yj ,c,t = 1|transparencyc,t) = logit(δj + βj transparencyc,t)

j ∈ {1, 2, ..., 240}c ∈ {1, 2, ..., 124}t ∈ {1, 2, ..., 31}

Priors: (δjβj

)∼ N(

(00

),

(100 0

0 100

))

transparencyc,1 ∼ N(0, 100) recentered at each iteration of the MCMC algorithm

transparencyc,t ∼ N(transparencyc,t−1,1

τc) ∀ t > 1

Cuba constrained to be negative, Sweden positiveHRV (Minnesota,NYU,Georgetown) Autocratic Transparency December 14, 2015

Extra Slides Transparency and State Capacity

Transparency v. GDP in Democracies and Autocracies


Extra Slides Transparency and State Capacity

Transparency v. GDP in Democracies and Autocracies


Extra Slides Transparency and Regime Transition

Hazard of Regime Transitions


Extra Slides Relationship with Alternative Forms of Transparency

Freedom House v. HRV



Newspaper Circulation per capita v. HRV



Media v. HRV



FOIs v. HRV


Extra Slides Other Time Series

Other Country Time-Series: Declines



Other Country Time-Series:EU Accessors



Time-Series: One Regime Transition



Time-Series: One Regime Transition



Time-Series: Multiple Regime Transitions


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