An independent and impartial judicial system is essential for a well-functioning democracy and the economy. Despite constitutional guarantees, elected politicians may substantially influence the legal system. I study whether politicians in power get special treatment in courts when facing criminal accusations. This paper is the first to provide causal evidence of the impact of winning office on a diverse range of criminal cases. I construct a unique panel of over 1,300 criminal cases for candidates for state legislative assemblies in India from 2004 to 2013. Using a regression discontinuity design, I compare the probability of a pending criminal case being closed without conviction at the end of a legislature for politicians who marginally won the election against those who marginally lost it. This paper uncovers significant opposite effects of winning office, depending on the political alignment with the state ruling party. Winners from the state ruling party are 17 percent more likely to get their pending criminal cases closed without conviction during their period in office. In contrast, winners from other parties are 15 percent less likely to get their pending cases closed without conviction during the same time-frame. The result suggests the misuse of attributions vested on those in power within the executive to manipulate the career of legal officials. I find evidence of manipulation of cases in states with judicial capacity constraints, and only non-serious criminal cases are subject to political manipulation, whereas serious cases are not.
Do incumbents react to information affecting their reputation? This paper focuses on Brazilian mayoral elections and municipal audits to study whether incumbents adapt their campaign expenditure to detrimental or beneficial information shocks impacting their reputation. The results show that candidates adapt their effort in campaigning. A detrimental (beneficial) shock results in incumbents increasing (decreasing) the amount of resources spent on campaigning. The results show that incumbents’ response on campaign expenditure partially compensates the negative (positive) effect produced by the information on electoral outcomes. Incumbents’ ability to react might explain why more information does not always imply more electoral accountability.
This paper introduces a two-stage contest model with reference-dependent preferences to study the determinants of conflict and its intensity. I show the existence of a Subgame Perfect Nash equilibrium in pure strategies, and characterize the properties of the equilibrium. The model shows that reference points play a crucial role in the decision of waging war, and in the level of intensity of the conflict. The model delivers predictions in line with the evidence, and explains empirical regularities that previous models cannot account for. The model encompasses two of the most common empirical patterns found in the conflict literature. Conflicts are more likely to occur after negative income shocks due to the current situation being perceived as a loss compared to agents' reference points. Additionally, income reduces the odds of conflict if agents are more risk-averse for gains than risk-seeker for losses.
Equilibrium with limited-recourse collateralized loans (2013) with J.P. Torres-Martínez, Economic Theory, 53: 181.
We address a general equilibrium model with limited-recourse collateralized loans and securitization of debts. Each borrower is required to pledge physical collateral, and bankruptcy is filed against him if claims are not fully honored. Moreover, agents have a positive amount of wealth exempt from garnishment and, for at least a fraction of them, commodities used as collateral are desirable. In this context, equilibrium exists for any continuous garnishment rule and multiple types of reimbursement mechanisms.