Do Leaders Matter? National Leadership and Growth Since World War II

Abstract

Economic growth within countries varies sharply across decades. This paper examines one explanation for these sustained shifts in growth-changes in the national leader. We use deaths of leaders while in office as a source of exogenous variation in leadership, and ask whether these plausibly exogenous leadership transitions are associated with shifts in country growth rates. We find robust evidence that leaders matter for growth. The results suggest that the effects of individual leaders are strongest in autocratic settings where there are fewer constraints on a leader's power. Leaders also appear to affect policy outcomes, particularly monetary policy. The results suggest that individual leaders can play crucial roles in shaping the growth of nations.

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“…Logically following Jones and Olken (2005) results, as well as the literature documenting the impact of firm managers and central bankers, the question of the individual characteristics that affect the quality of leadership emerges. Besley, Montalvo, and Reynal-Querol (2011) go one step further in this direction by investigating the impact of leaders' education.…”

“…In a seminal paper, Jones and Olken (2005) examine the change in national leaders as an explanation of growth shifts. They rely on a data set gathering 130 countries over the period, which represents 1,108 different national leaders for 1,294 distinct leadership periods.…”

“…Jones and Olken (2005) rely on an original strategy to assess the causal effect of leadership changes on growth: they identify leaders who died unexpectedly during their tenure, either because of a natural cause or in an accident, and thus exogenously left power. These cases of transitions provide natural experiments to study the impact of leadership changes on economic outcomes: in such cases, the timing of variation in the leadership is argued to be unrelated to underlying economic conditions.…”

“…Besley, Montalvo, and Reynal-Querol (2011) go one step further in this direction by investigating the impact of leaders' education. They expand the data set used by Jones and Olken (2005) to 1848, and collect information on education for a core sample of 1,654 leaders in 197 countries. They rely on the same identification strategy as Jones and Olken (2005), and allow leaders' effects to have an heterogenous impact on growth depending on educational attainment.…”

“…They expand the data set used by Jones and Olken (2005) to 1848, and collect information on education for a core sample of 1,654 leaders in 197 countries. They rely on the same identification strategy as Jones and Olken (2005), and allow leaders' effects to have an heterogenous impact on growth depending on educational attainment. They put forward a significant impact of leaders' education on growth: the more educated the leader who leaves power unexpectedly, the larger the adverse impact on economic growth.…”