Essays on Social Capital and State Capacity: Tracing the Origins of the Welfare States

In Chapter 2 of this Thesis, I study the effect of form of government on government policy in elections with a small margin of exceeding a threshold. I propose an identification strategy that is suitable for the implementation of a sharp regression discontinuity design for all possible types of pure and mixed proportional electoral systems used in 82 countries. To illustrate the implementation of this identification strategy, I use electoral, census and public finances data from Spanish municipalities in the autonomous region of the Basque Country. I present causal evidence suggesting that form of government induces a budget electoral cycle in components of per capita expenditure that are visible to the voters and classifiable as local public goods. Relative to coalition governments, single party governments increase the shares of capital outlays and tangible investment to the total budget by additional 14 % and 20 % respectively. In Chapter 3 of this Thesis, I present evidence that households contribute more to local public goods in the presence of a community organization based on cross-sectional survey data from low-income neighbourhoods of Quito, Ecuador. The observed differences in household contributions are attributed to the ability of a community organization to coercively induce households to commit their time to community projects. This coercive power is argued to have origins associated with the formation of a neighbourhood as an illegal settlement. This coercive power is also suggested to have been a by-product of households voluntarily contributing to the organization in return for protection against government eviction. Locations with specific geographic characteristics served an important role in providing natural protection and also in legally qualifying the organization to seek a global title over the invaded land. Using exogenous variation in these geographic characteristics, I find that the presence of a community organization has a positive effect on household time contributions to two public goods: trash collection in public areas (50 %) and community patrolling (176 %). In Chapter 4 of this Thesis, I develop an occupational choice model with open-rule legislative bargaining to determine the conditions allowing for poor property rights to arise in a democratic equilibrium and to also demonstrate that their presence leads to inefficient outcomes. The necessary conditions emerge when each rich agent self-selects as an entrepreneur for a positive theft rate. The equilibrium occupational shares determine the necessity for coalition formation in the legislature, where the endogenously determined status-quo theft rate is subject to revision. A minimum winning coalition favouring a higher theft rate up to a threshold value, at which each rich agent is just willing to be an entrepreneur who hires workers, provide the sufficient conditions. The equilibrium is inefficient because a positive equilibrium theft rate reduces implies that not all of endowment is invested in the most productive process. The majority in this society, the ex-ante identical poor agents, also end up being ex-post identical but their most preferred theft rate is higher relative to the equilibrium theft rate. This result arises because the poor agents end up being represented by two political parties based on their occupation choice.