you reap what you sow - princeton university...you reap what you sow agricultural bias and the...
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Motivation Theory Results Work in progress
You Reap What You SowAgricultural bias and the electoral politics of democratic
sovereign default
Cameron Ballard-Rosa
Department of Political Science,University of North Carolina, Chapel Hill
International Political Economy Society, 2014
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Previous work on debt default.I Macroeconomic theories: Eaton & Gersovitz (1981), Bulow &
Rogoff (1989), Reinhart, Rogoff & Savastano (2003), Bandiera,Cuaresma & Vincelette (2010)
I Reputational theories: Tomz (2007)
I Institutional theories: Kraay & Nehru (2006), VanRijckeghem & Weder (2009), Saiegh (2009), Kohlscheen(2010)
I Coalitional/geographic theories: Ballard-Rosa (2014)I “Given that the choice between default and repayment is
partly political, how do the preferences of voters andinterests groups matter, and what role do politicalinstitutions play in determining whether sovereigns repay?We suspect these questions will become major foci in theliterature." Tomz & Wright (2013)
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Previous work on debt default.I Macroeconomic theories: Eaton & Gersovitz (1981), Bulow &
Rogoff (1989), Reinhart, Rogoff & Savastano (2003), Bandiera,Cuaresma & Vincelette (2010)
I Reputational theories: Tomz (2007)
I Institutional theories: Kraay & Nehru (2006), VanRijckeghem & Weder (2009), Saiegh (2009), Kohlscheen(2010)
I Coalitional/geographic theories: Ballard-Rosa (2014)I “Given that the choice between default and repayment is
partly political, how do the preferences of voters andinterests groups matter, and what role do politicalinstitutions play in determining whether sovereigns repay?We suspect these questions will become major foci in theliterature." Tomz & Wright (2013)
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Previous work on debt default.I Macroeconomic theories: Eaton & Gersovitz (1981), Bulow &
Rogoff (1989), Reinhart, Rogoff & Savastano (2003), Bandiera,Cuaresma & Vincelette (2010)
I Reputational theories: Tomz (2007)
I Institutional theories: Kraay & Nehru (2006), VanRijckeghem & Weder (2009), Saiegh (2009), Kohlscheen(2010)
I Coalitional/geographic theories: Ballard-Rosa (2014)I “Given that the choice between default and repayment is
partly political, how do the preferences of voters andinterests groups matter, and what role do politicalinstitutions play in determining whether sovereigns repay?We suspect these questions will become major foci in theliterature." Tomz & Wright (2013)
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Previous work on debt default.I Macroeconomic theories: Eaton & Gersovitz (1981), Bulow &
Rogoff (1989), Reinhart, Rogoff & Savastano (2003), Bandiera,Cuaresma & Vincelette (2010)
I Reputational theories: Tomz (2007)
I Institutional theories: Kraay & Nehru (2006), VanRijckeghem & Weder (2009), Saiegh (2009), Kohlscheen(2010)
I Coalitional/geographic theories: Ballard-Rosa (2014)
I “Given that the choice between default and repayment ispartly political, how do the preferences of voters andinterests groups matter, and what role do politicalinstitutions play in determining whether sovereigns repay?We suspect these questions will become major foci in theliterature." Tomz & Wright (2013)
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Previous work on debt default.I Macroeconomic theories: Eaton & Gersovitz (1981), Bulow &
Rogoff (1989), Reinhart, Rogoff & Savastano (2003), Bandiera,Cuaresma & Vincelette (2010)
I Reputational theories: Tomz (2007)
I Institutional theories: Kraay & Nehru (2006), VanRijckeghem & Weder (2009), Saiegh (2009), Kohlscheen(2010)
I Coalitional/geographic theories: Ballard-Rosa (2014)I “Given that the choice between default and repayment is
partly political, how do the preferences of voters andinterests groups matter, and what role do politicalinstitutions play in determining whether sovereigns repay?We suspect these questions will become major foci in theliterature." Tomz & Wright (2013)
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Previous work on debt default.I Macroeconomic theories: Eaton & Gersovitz (1981), Bulow &
Rogoff (1989), Reinhart, Rogoff & Savastano (2003), Bandiera,Cuaresma & Vincelette (2010)
I Reputational theories: Tomz (2007)
I Institutional theories: Kraay & Nehru (2006), VanRijckeghem & Weder (2009), Saiegh (2009), Kohlscheen(2010)
I Coalitional/geographic theories: Ballard-Rosa (2014)I “Given that the choice between default and repayment is
partly political, how do the preferences of voters andinterests groups matter, and what role do politicalinstitutions play in determining whether sovereigns repay?We suspect these questions will become major foci in theliterature." Tomz & Wright (2013)
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
My argument
During fiscal crises, politicians are unwilling to make changesthat affect groups that keep them in power.
In democracies:I Politically powerful groups are those with disproportionate
electoral influence.I Rural electoral advantages –> rural bias –> agricultural
price supports.I Agricultural support policies can become a large fiscal
burden on the state.I Democratic rulers will be unwilling to adjust these policies
if the alternative is heavy electoral losses.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
My argument
During fiscal crises, politicians are unwilling to make changesthat affect groups that keep them in power.In democracies:
I Politically powerful groups are those with disproportionateelectoral influence.
I Rural electoral advantages –> rural bias –> agriculturalprice supports.
I Agricultural support policies can become a large fiscalburden on the state.
I Democratic rulers will be unwilling to adjust these policiesif the alternative is heavy electoral losses.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
My argument
During fiscal crises, politicians are unwilling to make changesthat affect groups that keep them in power.In democracies:
I Politically powerful groups are those with disproportionateelectoral influence.
I Rural electoral advantages –> rural bias –> agriculturalprice supports.
I Agricultural support policies can become a large fiscalburden on the state.
I Democratic rulers will be unwilling to adjust these policiesif the alternative is heavy electoral losses.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
My argument
During fiscal crises, politicians are unwilling to make changesthat affect groups that keep them in power.In democracies:
I Politically powerful groups are those with disproportionateelectoral influence.
I Rural electoral advantages –> rural bias –> agriculturalprice supports.
I Agricultural support policies can become a large fiscalburden on the state.
I Democratic rulers will be unwilling to adjust these policiesif the alternative is heavy electoral losses.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
My argument
During fiscal crises, politicians are unwilling to make changesthat affect groups that keep them in power.In democracies:
I Politically powerful groups are those with disproportionateelectoral influence.
I Rural electoral advantages –> rural bias –> agriculturalprice supports.
I Agricultural support policies can become a large fiscalburden on the state.
I Democratic rulers will be unwilling to adjust these policiesif the alternative is heavy electoral losses.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
My argument
During fiscal crises, politicians are unwilling to make changesthat affect groups that keep them in power.In democracies:
I Politically powerful groups are those with disproportionateelectoral influence.
I Rural electoral advantages –> rural bias –> agriculturalprice supports.
I Agricultural support policies can become a large fiscalburden on the state.
I Democratic rulers will be unwilling to adjust these policiesif the alternative is heavy electoral losses.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Rural-biased default hypotheses
I Must exist rural electoral advantages.
I H1: More rural democracies will be more likely to defaulton their sovereign debt.
I Farm subsidy program must be costly – this dependsgreatly on food trade status.
I H2: This effect will be most pronounced in food exporters.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Rural-biased default hypotheses
I Must exist rural electoral advantages.I H1: More rural democracies will be more likely to default
on their sovereign debt.
I Farm subsidy program must be costly – this dependsgreatly on food trade status.
I H2: This effect will be most pronounced in food exporters.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Rural-biased default hypotheses
I Must exist rural electoral advantages.I H1: More rural democracies will be more likely to default
on their sovereign debt.I Farm subsidy program must be costly – this depends
greatly on food trade status.
I H2: This effect will be most pronounced in food exporters.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Rural-biased default hypotheses
I Must exist rural electoral advantages.I H1: More rural democracies will be more likely to default
on their sovereign debt.I Farm subsidy program must be costly – this depends
greatly on food trade status.I H2: This effect will be most pronounced in food exporters.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Fiscal burden of farm support
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Data & EstimationI DV: default year (from R&R 2009) in democracies only.
I Main explanatory variable: rural population (as percent oftotal population)
I Economic controls (GDP per capita, ∆ GDP, debt/GDP,debt2, inflation, trade, foreign reserves)
I Demographic explanations (logged population, populationdensity )
I Political controls (election, margin of victory, governmentfractionalization)
I Estimating model:defaultit = β1ruralit−1 + γXit−1 + ηi + θt + εit
I All models include country and year fixed effects, andreport multiple imputation estimates of coefficients withstandard errors clustered at the country level.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Data & EstimationI DV: default year (from R&R 2009) in democracies only.I Main explanatory variable: rural population (as percent of
total population)
I Economic controls (GDP per capita, ∆ GDP, debt/GDP,debt2, inflation, trade, foreign reserves)
I Demographic explanations (logged population, populationdensity )
I Political controls (election, margin of victory, governmentfractionalization)
I Estimating model:defaultit = β1ruralit−1 + γXit−1 + ηi + θt + εit
I All models include country and year fixed effects, andreport multiple imputation estimates of coefficients withstandard errors clustered at the country level.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Data & EstimationI DV: default year (from R&R 2009) in democracies only.I Main explanatory variable: rural population (as percent of
total population)I Economic controls (GDP per capita, ∆ GDP, debt/GDP,
debt2, inflation, trade, foreign reserves)
I Demographic explanations (logged population, populationdensity )
I Political controls (election, margin of victory, governmentfractionalization)
I Estimating model:defaultit = β1ruralit−1 + γXit−1 + ηi + θt + εit
I All models include country and year fixed effects, andreport multiple imputation estimates of coefficients withstandard errors clustered at the country level.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Data & EstimationI DV: default year (from R&R 2009) in democracies only.I Main explanatory variable: rural population (as percent of
total population)I Economic controls (GDP per capita, ∆ GDP, debt/GDP,
debt2, inflation, trade, foreign reserves)I Demographic explanations (logged population, population
density )
I Political controls (election, margin of victory, governmentfractionalization)
I Estimating model:defaultit = β1ruralit−1 + γXit−1 + ηi + θt + εit
I All models include country and year fixed effects, andreport multiple imputation estimates of coefficients withstandard errors clustered at the country level.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Data & EstimationI DV: default year (from R&R 2009) in democracies only.I Main explanatory variable: rural population (as percent of
total population)I Economic controls (GDP per capita, ∆ GDP, debt/GDP,
debt2, inflation, trade, foreign reserves)I Demographic explanations (logged population, population
density )I Political controls (election, margin of victory, government
fractionalization)
I Estimating model:defaultit = β1ruralit−1 + γXit−1 + ηi + θt + εit
I All models include country and year fixed effects, andreport multiple imputation estimates of coefficients withstandard errors clustered at the country level.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Data & EstimationI DV: default year (from R&R 2009) in democracies only.I Main explanatory variable: rural population (as percent of
total population)I Economic controls (GDP per capita, ∆ GDP, debt/GDP,
debt2, inflation, trade, foreign reserves)I Demographic explanations (logged population, population
density )I Political controls (election, margin of victory, government
fractionalization)I Estimating model:
defaultit = β1ruralit−1 + γXit−1 + ηi + θt + εit
I All models include country and year fixed effects, andreport multiple imputation estimates of coefficients withstandard errors clustered at the country level.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Data & EstimationI DV: default year (from R&R 2009) in democracies only.I Main explanatory variable: rural population (as percent of
total population)I Economic controls (GDP per capita, ∆ GDP, debt/GDP,
debt2, inflation, trade, foreign reserves)I Demographic explanations (logged population, population
density )I Political controls (election, margin of victory, government
fractionalization)I Estimating model:
defaultit = β1ruralit−1 + γXit−1 + ηi + θt + εitI All models include country and year fixed effects, and
report multiple imputation estimates of coefficients withstandard errors clustered at the country level.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Baseline specifications
(1) (2) (3) (4)VARIABLES Bivar. Econ. Demog. Polit.
Rural pop. (% total pop.) 0.015*** 0.013*** 0.015*** 0.015***(0.005) (0.005) (0.005) (0.005)
Economic controls No Yes Yes YesDemographic controls No No Yes YesPolitical controls No No No YesObservations 1,621 1,621 1,621 1,621Countries 55 55 55 55
*** p<0.01, ** p<0.05, * p<0.1
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Food trade and democratic default
(1) (2) (3) (4) (5) (6)VARIABLES Bivar.X BaselineX Polit.X Bivar.M BaselineM Polit.M
Rural pop. 0.013*** 0.015*** 0.017*** -.0006163 0.005 0.005(0.005) (0.006) (0.007) (0.002) (0.003) (0.004)
Economic controls No Yes Yes No Yes YesPolitical controls No No Yes No No YesObservations 1,055 1,055 1,055 566 566 566# countries 41 41 41 34 34 34
*** p<0.01, ** p<0.05, * p<0.1
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Also in autocracies?
(1) (2)VARIABLES Democ. Autoc.
Rural pop. (% total pop.) 0.015*** -0.022***(0.005) (0.006)
Economic controls Yes YesDemographic controls Yes YesObservations 1,621 937Countries 55 42
*** p<0.01, ** p<0.05, * p<0.1
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Relative rate of assistance to agriculture
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
RRA and default in democ.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Next Steps
I Mechanism validation
I Historical evidenceI Macro-level correlatesI Meso-level transmissionI Micro-level interests
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Next Steps
I Mechanism validationI Historical evidence
I Macro-level correlatesI Meso-level transmissionI Micro-level interests
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Next Steps
I Mechanism validationI Historical evidenceI Macro-level correlates
I Meso-level transmissionI Micro-level interests
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Next Steps
I Mechanism validationI Historical evidenceI Macro-level correlatesI Meso-level transmission
I Micro-level interests
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Next Steps
I Mechanism validationI Historical evidenceI Macro-level correlatesI Meso-level transmissionI Micro-level interests
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
Motivation Theory Results Work in progress
Thank you!
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
The Model Other output tables Multiple Imputation diagnostics
Democratic cross-tabs
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
The Model Other output tables Multiple Imputation diagnostics
Rural bias and electoral survivalWhy should we care about rural electoral interests?
I Much formal work on electoral mobilization advantageshas specifically highlighted agricultural producers as socialgroups with disproportional electoral influence (Dixit &Londgregan (1996), Persson & Tabellini (2000)).
I Recent empirical work has demonstrated a number offorms of rural—especially agricultural—biases indemocratic policymaking (Varshney (1998), Stasavage(2005), Rodden (2010), Bates & Block (2011), Harding(2012), Golden & Min (2013)).
I Work on politics of trade reform has suggested thatagricultural price subsidies are one of the most intractableareas of trade liberalization (Davis (2003)).
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
The Model Other output tables Multiple Imputation diagnostics
Rural bias and electoral survivalWhy should we care about rural electoral interests?
I Much formal work on electoral mobilization advantageshas specifically highlighted agricultural producers as socialgroups with disproportional electoral influence (Dixit &Londgregan (1996), Persson & Tabellini (2000)).
I Recent empirical work has demonstrated a number offorms of rural—especially agricultural—biases indemocratic policymaking (Varshney (1998), Stasavage(2005), Rodden (2010), Bates & Block (2011), Harding(2012), Golden & Min (2013)).
I Work on politics of trade reform has suggested thatagricultural price subsidies are one of the most intractableareas of trade liberalization (Davis (2003)).
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
The Model Other output tables Multiple Imputation diagnostics
Rural bias and electoral survivalWhy should we care about rural electoral interests?
I Much formal work on electoral mobilization advantageshas specifically highlighted agricultural producers as socialgroups with disproportional electoral influence (Dixit &Londgregan (1996), Persson & Tabellini (2000)).
I Recent empirical work has demonstrated a number offorms of rural—especially agricultural—biases indemocratic policymaking (Varshney (1998), Stasavage(2005), Rodden (2010), Bates & Block (2011), Harding(2012), Golden & Min (2013)).
I Work on politics of trade reform has suggested thatagricultural price subsidies are one of the most intractableareas of trade liberalization (Davis (2003)).
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
The Model Other output tables Multiple Imputation diagnostics
Rural bias and electoral survivalWhy should we care about rural electoral interests?
I Much formal work on electoral mobilization advantageshas specifically highlighted agricultural producers as socialgroups with disproportional electoral influence (Dixit &Londgregan (1996), Persson & Tabellini (2000)).
I Recent empirical work has demonstrated a number offorms of rural—especially agricultural—biases indemocratic policymaking (Varshney (1998), Stasavage(2005), Rodden (2010), Bates & Block (2011), Harding(2012), Golden & Min (2013)).
I Work on politics of trade reform has suggested thatagricultural price subsidies are one of the most intractableareas of trade liberalization (Davis (2003)).
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
The Model Other output tables Multiple Imputation diagnostics
Countries in external sovereign debt default
Source: Reinhart & Rogoff (2009)
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
The Model Other output tables Multiple Imputation diagnostics
Actors I: CitizensI 2 citizen groups (U and R), and 2 political parties (I and C).I Rural citizens form proportion (1− α) of total population;
each produces b̄ units of food.I Urban citizens form proportion α of total population; each
produces x̄ units of (non-food) good.I Consumption utility for citizen i of type j :
vij(x ,b) = x + ln(b)
I Citizens also have individual preferences for I winningoffice σij ∼ U[− 1
2ψj, 1
2ψj] for j ∈ {R,U} as well as societal
“valence" shocks ε ∼ U[− 12η ,
12η ].
I Full utility for citizen i of type j :uij(x ,b) = vij(x ,b) + 1{G = I}(σij + ε)
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
The Model Other output tables Multiple Imputation diagnostics
Actors II: Parties
I Utility for political party k from winning office:uk (δ) = χ+ (1− δ)ρl
I Government can increase price of b by providingagricultural producer subsidy φ.
I Government budget constraint: γ ≥ C(φ) + (1− δ)dI Probability that C wins the election: νC(φC |φI) =
ηψ (αψU ln( π+φI
π+φC) + (1− α)ψR[(φC − φI)b̄ + ln( π+φI
π+φC]) + 1
2
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
The Model Other output tables Multiple Imputation diagnostics
Timing of the Game
1. Nature draws a world price of food π ∼ F (.).2. The Incumbent and Challenger simultaneously choose
whether to default or not, and select a feasible producerprice subsidy (δk ∈ {0,1}, φk ∈ [φ, φ̄] for k ∈ {I,C}).
3. Nature draws values for ε and for all σij .4. Citizens vote either for the Incumbent or the Challenger
based on uij(φI) versus uij(φC).5. The winning party assumes (or retains) control of the
executive, and payoffs accrue.
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
The Model Other output tables Multiple Imputation diagnostics
Level of rurality
(1) (2) (3) (4) (5) (6)VARIABLES Bivar.R BaselineR Polit.R Bivar.U BaselineU Polit.U
Rural pop. (%) 0.014*** 0.014** 0.026*** 0.008 0.006 0.009(0.005) (0.006) (0.008) (0.008) (0.008) (0.01)
Baseline controls No Yes Yes No Yes YesPolitical controls No No Yes No No YesObservations 733 733 733 888 888 888# countries 31 31 31 34 34 34
*** p<0.01, ** p<0.05, * p<0.1
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
The Model Other output tables Multiple Imputation diagnostics
Subsamples and placebos
(1) (2) (3) (4) (5) (6)VARIABLES No OECD PR Major. Currency Inflation Banking
Rural pop. (%) 0.026*** 0.016** 0.041*** -.0001809 -.0005694 .0002611Full controls Yes Yes Yes Yes Yes YesObservations 775 1,032 344 1,621 1,621 1,621# countries 33 44 16 55 55 55
*** p<0.01, ** p<0.05, * p<0.1
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
The Model Other output tables Multiple Imputation diagnostics
Overimputation
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill
The Model Other output tables Multiple Imputation diagnostics
Overdispersion
You Reap What You Sow Department of Political Science, University of North Carolina, Chapel Hill