Friday, May 8, 2009

Political opposition and wages

A very interesting paper (downloadable link here) on how the leftist government in Venezuela is using wages in the public sector as a tool to punish opponents (those who did not vote him in the last election).

In 2004, the Chávez regime in Venezuela distributed the list of several million voters whom had attempted to remove him from office throughout the government bureaucracy, allegedly to identify and punish these voters. We match the list of petition signers distributed by the government to household survey respondents to measure the economic effects of being identified as a Chavez political opponent. We find that voters who were identified as Chavez opponents experienced a 5 percent drop in earnings and a 1.5 percentage point drop in employment rates after the voter list was released. A back-of-the-envelope calculation suggests that the loss aggregate TFP from the misallocation of workers across jobs was substantial, on the order of 3 percent of GDP.
Alex Tabarrok writes:

What the authors find is shocking, albeit not surprising. Before the recall election, petition signatories and non-signatories look alike. After the election, the employment and wages of signatories drop considerably, about a 10% drop in wages relative to non-signatories. Survey evidence conducted by the authors is consistent with retaliation by Chavez supporters especially in the form of job losses in the public sector. The authors estimate that the retaliation was so widespread, many workers were pushed into informal employment, that the Venezuelan economy was significantly damaged.

Will we see similar trend in Nepal as well? The leftist Maoist led government is shedding its true color...