Political Centralization and Economic Performance: Evidence from Russia

What determines whether political centralization helps or hurts economic performance? This article identifies preexisting patterns of political competition as a critical factor in determining the impact of political centralization on subnational economies. In competitive regions, political centralization undermines economic performance by removing a functioning electoral mechanism that makes leaders responsive to a wide range of economic concerns. In uncompetitive regions, however, centralization encourages economic improvement by reducing leaders' reliance on narrow interests and making previously unassailable local leaders answerable to central political bosses. I test competing hypotheses about the economic effects of political centralization using a set of Russian regional reforms that removed the direct election of governors in favor of a system of centralized appointments. The data show that, on a number of different dimensions, economic performance suffered after centralizing reforms were adopted in Russia's politically competitive regions; in contrast, political centralization improved economic performance in those regions where strong incumbent governors had previously depressed political competition.