Investing in the roots of your political ancestors

Abstract

We use regional data for Greece between 1975–1989 to demonstrate a disproportionate allocation of public investment funds to prefectures that exhibited stronger support for the incumbent party. Our main empirical evidence comes from an Instrumental Variables (IV) analysis that exploits the discontinuity in Greece's political landscape after a brief military junta (1967–1974) to link the parties established after 1974 with their ancestors from the same 'political family' during the pre-dictatorial era. In particular, we show that the electoral strength of political ancestors influences the allocation of public investment. Moreover, there is a strong association between the political support of ancestor and descendant parties, both of which influence the allocation of public investment in prefectures with many core supporters. We also present evidence indicating that the appointment of deputy ministers from loyal prefectures of the incumbent party plays a significant mediating role in the allocation of public investment to prefectures with a strong base of core supporters.