Do Not Drain The Swamp! Populism, Bureaucracy and Economic Performance

Massimo Morelli, Dmitrii Petrukhin, Matia Vannoni

No 26277, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: Populist leaders often campaign against bureaucratic constraints, yet their economic performance may depend on the very institutional environment they inherit. We examine whether bureaucracy moderates the economic costs of populism using two complementary settings: cross-country synthetic-control evidence and a U.S. state-year panel spanning 1929–2023. The cross-country analysis offers suggestive evidence that the output decline following populist takeovers is attenuated in countries with stronger pre-existing bureaucratic institutions, particularly where bureaucracies are more independent. The U.S. state analysis provides sharper, within-country evidence. Leveraging LLM estimates of gubernatorial populism derived from State of the State speeches, we find that populist governors are associated with significantly lower per-capita income in states lacking an independent civil service, while no comparable penalty emerges—and the association is more than offset—where such protections are in force. Heterogeneity-robust event-study estimates point in the same direction, with the post-entry income decline concentrated in states without civil-service reform. Together, the evidence is consistent with independent bureaucracies acting as a partial buffer against the economic costs of populist governance: the ”swamp” appears to dampen the damage populism would otherwise cause.

Pages: 74
Date: 2026
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