Essays in Political Economy: Elections, Public Finance and Service Delivery in South Africa Verena Ernestine Kroth * A thesis submitted to the Department of Government of the London School of Economics and Political Science for the degree of Doctor of Philosophy. London, April 2014. ___________________________ * London School of Economics and Political Science Declaration I certify that the thesis I have presented for examination for the MPhil/PhD degree of the London School of Economics and Political Science is solely my own work other than where I have clearly indicated that it is the work of others (in which case the extent of any work carried out jointly by me and any other person is clearly identified in it). I can confirm that the idea for chapter 2 emerged from my previous study for Master of Public Administration at the London School of Economics and Political Science. Chapter 3 is based on a paper that was written jointly with Joachim Wehner and Valentino Larcinese. I certify that I was responsible for the data collection and spatial analysis. Each of us contributed equally to the data analysis and writing of the paper. The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without the prior written consent of the author. I warrant that this authorization does not, to the best of my belief, infringe the rights of any third party. I can confirm that this thesis was copy edited for conventions of language, spelling, and grammar by Michael Wise. 2 Abstract Who gets what, when and how? Each of the three papers in this thesis makes a distinct contribution to answering this question in the context of the political economy of South Africa. The first paper examines how South Africa’s public financial management system distributes central government funds to its provinces. Using a unique panel dataset comprising all provinces and three elections over the period 1995-2010, I demonstrate that provinces where the national ruling party has higher vote margins receive higher per capita equitable shares in pre-election years. This result suggests that even in a dominant party framework, electoral competition can function as an incentive to implement political budget cycles. The second paper evaluates how the extension of the franchise affected the delivery of electricity to South African households. The dataset combines nightlight satellite imagery, census data and municipal election results, making it possible to exploit the heterogeneity in the share of newly enfranchised voters across nearly 800 municipalities with a difference-in-differences approach. The analysis demonstrates that enfranchisement has a significant positive effect on household electrification. Moreover, the findings show that political parties have a potential mediating role in accounting for service delivery patterns in new democracies. The third paper addresses the problem of measurement in studying public service delivery by examining a novel methodology for combining census-based data with satellite imagery of the world at night. Using cross-national data and South African census data, the paper provides a roadmap for how to navigate limitations and thus make the most of this technological advance in quantitative social science research. 3 Acknowledgments There are many individuals to whom I am very grateful for guidance and support. First and foremost, I would like to thank my supervisor, Joachim Wehner, who inspired me to take on this project and provided invaluable ideas and feedback every step of the way. I would also like to thank my advisor, Valentino Larcinese, for his continued support, and Bob Mattes who provided invaluable guidance during my time at the Democracy in Africa Research Unit at the University of Cape Town. At Harvard University, where I spent the last year of my PhD, I benefited greatly from Jim Alt’s mentorship. The spatial analysis in my thesis was possible thanks to the support from Harvard’s Center for Geographic Analysis and Institute for Quantitative Social Science. The first paper benefitted particularly from discussions with Joachim Wehner, Jim Alt, Albert van Zyl and Robert Cameron. The second paper was co-authored with Joachim Wehner and Valentino Larcinese and we received helpful feedback from Mark Borchers, Robert Cameron, Daniel de Kadt, Torun Dewan, Taryn Dinkelman, Andy Eggers, Steven Friedman, Elliott Green, Dominik Hangartner, Simon Hix, Mareike Kleine, Johannes Lindvall, Brian Min, Ian Osgood, Pablo Querubin, David Soskice, Johannes Urpelainen, and Leonard Wantchekon. The idea for the third paper was inspired by Brian Min and greatly benefitted from written feedback from Anne-Marie Jeannet and Clara Rubincam. For support with data and spatial analysis relevant to all chapters, I wish to extend a special thank you to Simo Goshev at the Harvard-MIT Data Center, Kevin Perry at StatsSA, and Giovanni Zambotti and Stacy Bogan at the Harvard Center for Geographic Analysis. 4 Table of Contents Chapter I Introduction 10 1.1 Investigating the role of political competition as an incentive to redistribute public resources 11 1.2 Emphasizing the institutional environment as a determinant of available policy options 13 1.3 Explaining distributive patterns of public service delivery 15 1.4 Using South Africa as a testing ground for the politics of service delivery 17 1.5 Highlighting the importance of measurement and good data 20 Chapter II Political budget cycles and intergovernmental transfers in a dominant party framework: empirical evidence from South Africa 22 2.1 Introduction 23 2.2 A distributive politics perspective on political budget cycles 26 2.3 Incentive and ability in the South African context 30 2.4 Empirical strategy 40 2.5 Estimation results 47 2.6 Evaluation and further discussion 53 2.7 Conclusion 57 Chapter III A better life for all? Democratization and electrification in post-apartheid South Africa 60 3.1 Introduction 61 3.2 Enfranchisement, political parties, and electrification 67 3.3 Variables and data 73 3.4 Empirical strategy 84 5 3.5 Main results 85 3.6 The mediating role of political parties 95 3.7 Conclusion 102 Chapter IV How can we study socioeconomic outcomes from outer space? Opportunities and pitfalls of using nighttime lights data in quantitative social science research 106 4.1 Introduction 107 4.2 A social science perspective on nighttime light satellite imagery 112 4.3 Turning nighttime lights into proxies for socioeconomic outcomes 124 4.4 Cross-validation with cross-country and census data 128 4.5 Categorizing pitfalls and navigating them 141 4.6 Conclusion 152 Chapter V 155 Discussion and implications 155 References 166 Appendix 193 Appendix A 193 Appendix B 196 Appendix C 213 6 List of Tables Table 1: Electoral outcomes in South African provinces, 1994, 1999, 2004 and 2009 ...................................................................................................... 33 Table 2: Definition and descriptive statistics for key variables .................. 44 Table 3: The impact of vote margin on intergovernmental transfers in pre- election years .............................................................................................. 51 Table 4: The evolution of the pre-election vote margin effect over time .. 56 Table 5: The impact of enfranchisement on electrification (census data) . 88 Table 6: The impact of enfranchisement on electrification (satellite data, with placebo regressions) ......................................................................... 93 Table 7: The impact of enfranchisement on electrification (contiguous census tract pairs) ...................................................................................... 94 Table 8: The role of the ANC’s seat share on local councils...................... 101 Table 9: Correlating different measures of socioeconomic outcomes in 81 countries ................................................................................................... 133 Table 10: Correlating different measures of socioeconomic outcomes in South African municipalities ................................................................. 140 Table 11: Overview matrix of electrification measures ............................. 150 Appendix Table A1: Components of the equitable share formula between 1995 and 2010 ................................................................................................ 193 Appendix Table A2: Description of variables .................................................. 194 Appendix Table B1: Geographical hierarchies in census 1996 and 2001 205 Appendix Table B2: Descriptive statistics ......................................................... 209 Appendix Table B3: Robustness to excluding municipalities with high levels of electrification in 1996 ............................................................................... 210 7 Appendix Table B4: Robustness to excluding municipalities in individual provinces........................................................................................................ 211 Appendix Table C1: Selected empirical applications of nighttime light satellite imagery in descending order ....................................................... 218 Appendix Table C2: Tracing changes in socioeconomic outcomes over time ......................................................................................................................... 219 8 List of Figures Figure 1: Breakdown