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The Price of Political Opposition: Evidence from Venezuelas Maisanta

by Chang-Tai Hsieh, Edward Miguel, Daniel Ortega, and Francisco Rodrguez. Reading for Tuesday, 6 November.

Do individuals who join the political opposition pay an economic price? We study this question using unique information on individual political activity from Hugo Chávez’s Venezuela, the Maisanta database. The names of millions of pro-opposition supporters who signed recall petitions (seeking to remove Chávez from office) during 2002-2003, and the names of progovernment supporters who signed counter-petitions, were made public. Media accounts detail how this information has been utilized by both sides: by the Government to punish opposition supporters and firms, and by the overwhelmingly pro-opposition private sector to discriminate against government supporters in hiring. After linking this political database to both national household survey and manufacturing firm data, we find that pro-opposition individuals experience significant drops in total earnings after 2003. There is extensive churning in the labor market: pro-opposition individuals disproportionately leave public sector employment and progovernment individuals leave private sector employment. Pro-opposition firms have falling total employment, less access to foreign exchange, and rising tax burdens (possibly due to selective audits). The misallocation of resources associated with political polarization between 1999-2004 contributed to a decline of 5% in TFP in our sample. To the extent other regimes can identify and punish the political opposition, these findings may help explain why dislodging authoritarian regimes often proves difficult in less developed countries.

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Center for Comparative and Global Research