We show empirical evidence that non-democratic countries with [geographically] isolated capital cities display worse quality of governance, as measured across many different dimensions. We provide a framework of endogenous institutional choice that accounts for this stylized fact, based on the idea that autocratic elites are constrained by the threat of rebellion, and that this threat is rendered less effective by distance from the seat of political power. Broader power sharing (associated with better governance) means that any rents have to be shared more broadly, hence the elite has less of an incentive to protect its position by isolating the capital city. Conversely, a more isolated capital city allows the elite to appropriate a larger share of output, so the costs of better governance for the elite (the rents that would have to be shared) are larger. In equilibrium, a correlation between isolated capitals and misgovernance emerges as a result. The framework yields additional predictions on the size of the income premium enjoyed by capital city inhabitants and on the level of military spending by ruling elites, which are also supported by the evidence.
The title is “Isolated Capital Cities and Misgovernance: Theory and Evidence.”
We show that isolated capital cities are robustly associated with greater levels of corruption across US states. In particular, this is the case when we use the variation induced by the exogenous location of a state’s centroid to instrument for the concentration of population around the capital city. We then show that different mechanisms for holding state politicians accountable are also affected by the spatial distribution of population: newspapers provide greater coverage of state politics when their audiences are more concentrated around the capital, and voter turnout in state elections is greater in places that are closer to the capital. Consistent with lower accountability, there is also evidence that there is more money in state-level political campaigns in those states with isolated capitals. We find that the role of media accountability helps explain the connection between isolated capitals and corruption. In addition, we provide some evidence that this pattern is also associated with lower levels of public good spending and outcomes.
“Trenton Makes the World Takes” — not exactly!