The Costs of Patronage: Evidence from the British Empire∗

I combine newly digitized personnel and public finance data from the British colonial administration 1854-1966 to study how patronage affects the promotion and performance of governors. Governors are more likely to be promoted to higher salaried colonies when connected to their superior during the period of patronage. Once allocated, they provide more tax exemptions, raise less revenue, and invest less. The promotion and performance gaps disappear after the abolition of patronage appointments. Colonies administered longer by connected governors during the patronage period exhibit lower fiscal capacity today. Exposure to connected governors after the removal of patronage has no long-run impact. JEL codes: O1, M51, D73 ∗I thank Oriana Bandiera, Marianne Bertrand, Tim Besley, Michael Best, Michael Burda, Robin Burgess, Ernesto Dal Bó, Jeremiah Dittmar, Dave Donaldson, James Fenske, Thiemo Fetzer, Fred Finan, Leander Heldring, Henrik Kleven, Matt Lowe, Darryl Lundy, Sam Marden, Luis Martinez, Raul Sanchez de la Sierra, Sandra Sequeira, Daniel Sturm and Noam Yuchtman for valuable comments. I thank Huseyin Aydin, Michael Devine, Roisin Hannon, Elena Holtkotte, Jonas Jessen, Mouchen Liu and Bethany Nelson for excellent research assistance. Financial support from STICERD and the IGC is gratefully acknowledged. All errors remain my own. Haas School of Business, University of California, Berkeley (e-mail: [email protected])