Populism and State Capture: Evidence from Latin America

Abstract

This paper shows that, on average, populism in power produces a decrease in state capture. However, (unconstrained) populism in power that reduces existing levels of rule of law generates greater state capture than (contained) populism that has no negative effects on rule of law. The moderating effect we theorize is that the strength of the rule of law on state capture will show decreased effects at controlling state capture when a country is populist relative to non-populist. Populist leaders may seek to rid the old corruption networks, but once they aggrandize their power and weaken the rule of law, they have incentives to establish corrupt linkages with opportunistic economic elites who are willing to work with them, increasing state capture as a result. To test this theory, the paper employs a random effects model with 6 different specifications across 18 different Latin American countries, throughout the time period 1996-2017.