Balancing bossism: State expansion in the face of elite capture

Abstract Central states have often relied on local elites to implement policies in peripheral areas. These strategies may allow otherwise weak states to impose their directives, but they can also be inefficient, particularly when a single elite commands total control over local politics ( monopolist capture ). We argue that weak states can overcome this equilibrium by creating new subnational positions with distinct appointment rules from existing ones ( balancing ). We evaluate our argument leveraging a natural experiment and novel data on 12,000 sub‐municipal units from turn‐of‐the‐twentieth‐century Peru. We exploit as‐if random variation in population‐based appointment rules for a justice of the peace, the chief institution through which monopolist capture was established. We provide evidence that the Peruvian government responded to monopolist capture by creating local‐level executive positions (lieutenant governors). We further demonstrate that this balancing allowed the state to conduct a 1902 education census, which was otherwise opposed and often blocked by entrenched elites.