American Political Science Review Vol. 108, No. 2 May 2014 doi:10.1017/S0003055414000112 c American Political Science Association 2014 The Returns to Office in a “Rubber Stamp” Parliament RORY TRUEX Yale University re there returns to office in an authoritarian parliament? A new dataset shows that over 500 deputies to China’s National People’s Congress are CEOs of various companies. Entropy bal- A ancing is used to construct a weighted portfolio of Chinese companies that matches companies with NPC representation on relevant financial characteristics prior to the 11th Congress (2008–2012). The weighted fixed effect analysis suggests that a seat in the NPC is worth an additional 1.5 percentage points in returns and a 3 to 4 percentage point boost in operating profit margin in a given year. Additional evidence reveals that these rents stem primarily from the “reputation boost” of the position, and not necessarily formal policy influence. These findings confirm the assumptions of several prominent theories of authoritarian politics but suggest the need to further probe the nature of these institutions. egislators in democratic contexts appear to reap states that autocrats create legislative institutions to personal benefits from their positions. In a de- co-opt would-be opposition into the policy process L tailed historical analysis of the British House of (Gandhi 2008; Gandhi and Przeworski 2006, 2007; Commons, Eggers and Hainmueller (2009) show that Malesky and Schuler 2010), giving key actors limited members of the Conservative Party are able to use their policy influence and access to rents (Lust-Okar 2006). political influence to obtain lucrative outside employ- Across several works, Boix and Svolik argue that par- ment. Winning a seat effectively doubles a Member of liaments are institutions of power-sharing, helping au- Parliament’s (MPs) wealth over the course of a lifetime, tocrats credibly commit to distributing resources to the as compared to a group of candidates that narrowly lost rest of the ruling clique (Boix and Svolik 2013; Svolik their elections. Querubin and Snyder (2011) exploit a 2009, 2012). Selectorate theory holds that authoritarian similar regression discontinuity approach to examine regimes allocate private rents to the small group of the accumulation of wealth among members of the U.S. supporters that keep them in office. Although regime House of Representatives in the middle of the nine- transitions are usually brokered behind closed doors, teenth century, finding significant returns during the autocrats may still buy off members of parliament, who Civil War years. Heightened military spending, com- bestow formal legitimacy (Bueno de Mesquita et al. bined with decreased media oversight, offered sitting 2003, 2008).1 legislators a special opportunity for rent collection. As While these theories differ in their depictions of we might expect, businesses with political connections authoritarian politics, they all point to legislative in- to individual legislators also benefit from the office. stitutions as places of action, places where rents and Roberts (1990) shows that firms from Senator Henry influence are distributed to foster the cooperation Jackson’s state experienced an abnormal 1.6% drop of key actors. We might also expect rents to be es- in share price on the day of his unexpected death. In pecially high given the governance characteristics of a cross-national study in 47 countries, Faccio (2006) most autocracies—a lack of electoral accountability, estimates that politically connected firms receive a cu- high levels of corruption, and weak regulatory envi- mulative abnormal return of 1.28% when their officers ronments (Faccio 2006; Ferraz and Finan 2011). To become members of parliament. These returns appear date, there is little hard evidence in this regard. Re- to be highest in places with rampant corruption. cent macro-level work suggests that parliaments are Theories of authoritarian politics predict similar re- associated with growth and regime stability (Gandhi turns for authoritarian legislators, but for reasons hav- and Przeworski 2007; Gandhi 2008; Wright 2008), but ing to do with regime stability. Co-optation theory it remains unclear whether authoritarian parliaments actually bring tangible benefits to their members. Common perceptions of these “rubber stamp” in- Rory Truex is Ph.D. Candidate, Rosenkranz Hall, Department stitutions would suggest that opportunities for rent- of Political Science, Yale University New Haven, CT 06520 seeking behavior are minimal, giving reason to doubt ([email protected]). This material is based upon work completed in Yale’s doctoral the theoretical consensus. In China, for example, jour- program in political science and supported by the National Sci- nalists describe the annual two-week meeting of the ence Foundation’s Graduate Research Fellowship Program (GRFP). National People’s Congress (NPC) as a “tightly con- Additional financial support was provided by Yale University’s trolled event featuring much pageantry and precious MacMillan Center for International and Area Studies and Leitner Program in Political Economy. Thanks to Peter Aronow, Stephanie little drama” (“What Makes a Rubber Stamp,” 2012). Balme, Allison Carnegie, Thad Dunning, Jennifer Gandhi, Jamie To date, no single law or nomination before the full Horsely, Scott Kennedy, Peter Lorentzen, Pierre Landry, Xiaobo NPC plenary session has ever been voted down. Hu Lu, Eddy Malesky, Emerson Niou, Kevin O’Brien, Susan Rose- Xiaoyan, an NPC deputy and migrant worker from Ackerman, Ken Scheve, Dawn Teele, Lily Tsai, Jeremy Wallace, Michael Weaver, Jessica Weiss, and participants at conferences and presentations at UC Berkeley, Duke, Emory, NYU, Princeton, Stan- ford, and Yale for helpful comments at various stages in the project. 1 In the Chinese case, for example, the National People’s Congress Any remaining errors are my own. Replication files are available on formally votes on all government leadership positions, even though the author’s personal website: http://pantheon.yale.edu/rot3/. the appointments are decided by CCP elites months before. 235 The Returns to Office in a “Rubber Stamp” Parliament May 2014 Guangdong, famously commented, “As a parliamen- may simply have better financial prospects to begin tary representative, I don’t have any real power” (Bris- with, for any number of reasons. To gain traction over tow 2009). Deputies are effectively unpaid and have the problem and address selection concerns, I employ no personal staff. Party authorities routinely discipline an entropy weighted fixed effect design (Hainmueller deputies for corrupt activities, who are instructed to 2012). A standard fixed effects model accounts for represent the interests of the people, and not them- time-invariant confounders and aggregate level shocks selves (O’Brien 1994). At first glance, these observa- but is vulnerable to departures from the parallel trends tions do not seem indicative of an institution that is a assumption. To make a more plausible counterfac- meaningful forum of rent distribution. tual group, entropy balancing is used to construct a This leaves us with two competing expectations. weighted portfolio of Chinese companies that matches A regime’s need to purchase support, coupled with the companies with NPC representation on relevant high levels of corruption and a general lack of elec- financial characteristics just prior to the 11th NPC. The toral accountability, suggest that legislators can accrue “NPC portfolio” and weighted “non-NPC portfolio” substantial personal benefits. The general weakness have the same mean operating profit margin and return of authoritarian legislative institutions, combined with on assets over the 2005–2007 period, as well as bal- regime disciplinary controls, would suggest that the re- anced distributions across industries and other finan- turns are minimal. This article aims to adjudicate these cial metrics. Any performance differences that emerge expectations and answer two related questions. Are in the 11th NPC session (2008–2012) are suggestive of there “returns to office” in authoritarian parliaments? a causal effect, although we should always remain cau- If so, how exactly do representatives and their affili- tious in making this inference from observational data. ates obtain benefits, given that these institutions are so The evidence suggests that a seat in the NPC may highly constrained? be worth an additional 1.5 percentage points in re- I address these questions with new data on the back- turns and an additional 3 to 4 percentage points in grounds, behaviors, and financial connections of the operating profit margin in a given year. Interviews nearly 3000 deputies to China’s NPC. China presents with Chinese financial experts confirm the plausibil- an interesting case given the country’s growing impor- ity of these estimates (Personal Interview BJ22213; tance, and a challenging case for the theories above Personal Interview BJ28213a; Personal Interview given that the NPC is commonly dismissed as mean- BJ28213b; Personal Interview BJ28213c; Personal In- ingless. Empirically, certain institutional features allow terview BJ1313; Personal Interview BJ2313a; Personal me to estimate the personal benefits of membership for Interview BJ2313b), which are robust across a num- a subset of deputies. Unlike representatives in most na- ber of different specifications and estimation strategies. tional parliaments, NPC deputies fulfill their duties on Interestingly, estimates from interacted models