Working Paper
Clientelism and development: is there a poverty trap?

There are sound theoretical reasons to expect clientelism to suppress economic growth: politicians who garner support by offering employment to voters and grassroots party members can do so more effectively when the voters’ participation constraint is met with low wages. Hence, clientelism can become a poverty trap.

Yet in many countries, the heyday of political clientelism coincided with periods of rapid economic growth. I offer preliminary evidence of this coincidence of clientelism and economic growth in several OECD countries, at earlier stages of development.

An explanation is that clientelism can be a product of industrialization, urbanization, and economic growth. This growth may persist, despite patron–politicians’ incentives to keep the poor in poverty. As private-sector wages edge up, the patron–politician cannot offer a wage that satisfies the voter–worker’s participation constraint, and the political relationship between them unravels.