Three Essays on Political Economy
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2025-03-21
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Salgado, Marcos
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This thesis consists of three independent papers examining different topics related to political economy literature. The first paper (Why do People Follow Leaders? Evidence from 1936 Spain), co-authored with Lucas Carvalho and Marcos Salgado, investigates why individuals follow leaders by analyzing the 1936 Spanish Coup, where military officers were more likely to join the rebellion if they had previously served under rebel leaders, despite these leaders no longer holding formal authority over them. The research identifies two primary mechanisms driving this behavior: coordination (officers using former leaders’ choices to predict coup success) and career concerns (officers who followed successful coup leaders historically received faster promotions). The second paper (Campaign Length and Incumbency Advantage: a Calendar Experiment), designed as a short paper, examines how campaign duration affects incumbency advantage in Brazilian elections. By exploiting the natural experiment created by Brazil’s electoral calendar, it demonstrates that longer campaign periods significantly reduce incumbency advantage, with each additional week of campaigning decreasing the vote share gap between incumbents and challengers by five percentage points. This effect is particularly pronounced in areas where challengers had low initial recognition, suggesting campaign length especially benefits lesser-known candidates. The third paper (Electoral Risk in Firms) introduces a novel measure of firm-level electoral risk based on abnormal stock returns during Brazilian presidential elections from 2002 to 2022. This measure incorporates electoral polls data to identify impact dates and track market reactions. This innovative approach captures uncertainty even in elections that are predictable on election day by tracking price movements throughout the entire election year. The analysis shows that firms with higher electoral risk exposure reduce both investment and financing as elections approach, while firms positively correlated with winning candidates strategically increase investment and new financing immediately after elections.