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)

We study why subordinates followed their leaders in the Spanish Coup of 1936. We find that the 1936 chain of command was widely broken, but subordinates followed their former leaders. Officers who had served under rebel leaders before 1936 were thirteen percentage points more likely to join the rebellion. Our identification strategy exploits rotation among military leaders to compare officers exposed to rebel leaders to their peers who served in the same destination a few years before or after. We show that our control and treatment samples are balanced in many covariates and that our findings are not driven by selection. We also study the mechanisms behind our results, ruling out indoctrination and finding support for leaders as coordination devices and for expectations of promotions. Link to paper 

(with Antonella Bandiera and Valentín Figueroa)

In this paper, we find that dynastic marriages between states in Medieval and Modern Europe increased the probability of war. Even though the conventional wisdom is that dynastic marriages reduced conflict, when two royal families intermarried, this opened the door to what we call “internationalized succession disputes”: Foreign actors obtained legal claims to the kingdom’s land and titles. Since marriages are endogenous, we use an instrumental variable design that exploits randomness in the gender and timing of royal offspring. Rulers with sons were more likely to forge dynastic alliances with rulers with daughters, and we use the number of male-female pairs between dynastic families as an instrument for the observed quantity of marriages. We find a large, positive effect of marriages on war.  Link to paper