Marcos Salgado

How do rulers manage to govern when they cannot implement policy themselves and have limited means to monitor and even communicate with their agents? The personal loyalties of high-ranking officials can help overcome or exacerbate agency problems. The Spanish Empire promoted links between colonial officials and their superiors in Spain and discouraged social ties between them and local elites. I use superiors’ entries and exits as within-official shocks to connections to estimate their effect on promotions and performance. I find that connected ministers were more likely to be promoted and raised more revenue. On the other hand, ministers with more links to local elites collected less revenue. These patterns are explained by personal connections, defined as sustained in-person interactions during their early careers. I also validate the connections measure by showing that they predict endogenous friendships. Link to paper

(with Saumitra Jha and Peter Koudijs)

Can differences in political beliefs, particularly about the benefits of war versus peace, move thick financial markets? To answer this question, we analyze price differences of the actively traded French government Rente in Paris, Bordeaux and Lyon during the Siege of Paris and the subsequent peace negotiations (1870-1871). After Prussia invaded France and laid siege to Paris, information delays limited arbitrage between markets, allowing different local equilibrium prices to emerge. We document that Parisians favored continued resistance, while the rest of France favored an armistice, with these different beliefs evident in a national election widely regarded as a referendum on war versus peace. Following an unlikely victory by French citizen-soldiers, Rente prices, reflecting the costs and benefits of an eventual peace treaty to the French state, diverged substantially in and outside Paris. While France resisted, prices in Paris were higher. However, after the armistice, price differences reversed dramatically, with prices in Paris now substantially lower. Prices only converged after the details of the peace treaty were announced. These patterns match the predictions of a stylized model with different beliefs about how battlefield outcomes affect final peace terms. Consistent with this model, the Rente price responded more strongly to war events in Paris than in the outside markets, reflecting a stronger perceived sensitivity of peace terms to battlefield outcomes. Using detailed data on information transmission and other financial assets and food prices, we show that differences in information sets, liquidity, or discount rates are unlikely to explain these results.  Link to paper 

(with Vitor Calafate and Lucas Carvalho)
Revision requested by the Economic Journal

To understand why subordinates follow leaders, we study the 1936 Spanish coup, where the army split between rebels and loyalists. While the 1936 chain of command collapsed, we show that officers followed their former commanders, even though these leaders no longer held formal authority or coercive power over them. Our identification exploits plausibly exogenous rotation, comparing officers exposed to a rebel leader with peers posted to the same posting at a different time. We examine three channels through which past leaders might influence their former subordinates: indoctrination, information, and career concerns. We only find evidence for the latter two. Link to paper 

(with Edilson Figueiredo and Valentín Figueroa)

onfiscating religious orders (networks of monasteries) was a hallmark of historical state-making, yet its peculiar dynamics have not yet been analyzed. We argue that because monasteries were geographically dispersed and maintained translocal ties, their suppression provoked resistance where other monasteries continued to exist, not where suppression occurred. Since suppression could trigger system-wide backlash, rulers faced incentives to move swiftly and comprehensively rather than gradually, and this produced patterns of punctuated suppression. We study England's 1536 Dissolution of the Monasteries and show that rebellion was more likely near monasteries spared from initial suppression- a pattern confirmed using a regression discontinuity design. Analyzing monastery closures across 18 European regions from 1000 to 1850, we demonstrate that religious suppression usually unfolded as rapid, wholesale episodes rather than incremental processes. Link to paper 

(with Guilherme Cota, Andrea Flores, and Gustavo Oliveira)

This paper examines democratic elections as an alternative to political appointments for selecting school principals in Brazil, where 13.7 million public school students attend schools with elected principals. Using panel data (2007-2017), we exploit within-school variation from schools that switch selection methods over time. Schools transitioning from political appointments to elections improve their management practices by 13% of a standard deviation, while schools moving in the opposite direction experience a symmetric deterioration of 17% of a standard deviation. To put this magnitude into context, achieving similar improvements through wage increases would require raising principal salaries by 76%. Event studies reveal no pre-trends and persistent effects, supporting causal interpretation. Electoral selection may work through two mechanisms: selecting better principals and creating incentives for incumbents to improve performance to secure re-election. We find evidence for the selection mechanism-elected principals are 5.9 percentage points more likely to hold postgraduate degrees and have greater experience in education. These findings suggest electoral selection enhances organizational performance by reducing political patronage while incorporating stakeholder knowledge about candidate quality. Link to paper