The Politics of Market Selection
AbstractThis work seeks to determine the effect of political power of economic sectors in the policies their plants face, in their market survival probabilities, and in the aggregate productivity of the economy. Data from colombian manufacturing sector at the plant level for the period 1990-1998 is used to estimate several empirical models. Also, political power variables are constructed: dummy variables that indicate membership to economic associations and economic corporate groups, and an index that captures both the economic importance of the plant’s economic sector in the geographical region where it is located, and the electoral influence of that region in the national political scene. In the first place, we estimate the effect of political power on policy variables. For these, we use nominal tariffs, mainly because they show differential treatments between sectors, because they affect all sectors in the economy, and because they represent policies in a quantitatively way, and thus are subject to quantitative modeling. We found that political power of sectors has a significant and positive effect on the tariffs their plants face. This happens both when it comes from belonging to an organized group that can perform lobby activities and when it comes from the political support that the sector’s welfare implies for policy makers. In the second place, a market selection model is estimated to determine the effect of political power on the probability of exit of a plant. We found that a plant that belongs to a more politically influential sector can survive in the market with productivity levels that would otherwise make it go out of business (compared to plants belonging to sectors with less political power). Third, the economy’s aggregate productivity is calculated with and without the effect of political power. We find that, since this effect allows less productive plants to survive, aggregate productivity is decreased an average of 9.86% per year.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by UNIVERSIDAD DE LOS ANDES-CEDE in its journal REVISTA DESARROLLO Y SOCIEDAD.
Volume (Year): (2006)
Issue (Month): ()
Contact details of provider:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bonomo, Marco Antônio Cesar & Terra, Maria Cristina T., 2005. "Special Interests and Political Business Cycles," Economics Working Papers (Ensaios Economicos da EPGE) 597, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Eric J. Bartelsman & Mark Doms, 2000.
"Understanding productivity: lessons from longitudinal microdata,"
Finance and Economics Discussion Series
2000-19, Board of Governors of the Federal Reserve System (U.S.).
- Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September.
- Bartelsman, Eric & Haltiwanger, John & Scarpetta1, Stefano, 2004.
"Microeconomic evidence of creative destruction in industrial and developing countries,"
Policy Research Working Paper Series
3464, The World Bank.
- Eric J. Bartelsman & John Haltiwanger & Stefano Scarpetta, 2004. "Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries," Tinbergen Institute Discussion Papers 04-114/3, Tinbergen Institute.
- Bartelsman, Eric & Haltiwanger, John C. & Scarpetta, Stefano, 2004. "Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries," IZA Discussion Papers 1374, Institute for the Study of Labor (IZA).
- Baldwin,John R. & Gorecki,Paul With contributions by-Name:Caves,Richard E. With contributions by-Name:Dunne,Tim With contributions by-Name:Haltiwanger,John, 1998.
"The Dynamics of Industrial Competition,"
Cambridge University Press, number 9780521633574, December.
- Baybars Karacaovali, 2011.
"Productivity Matters For Trade Policy: Theory And Evidence,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 33-62, 02.
- Baybars Karacaovali, 2008. "Productivity Matters for Trade Policy: Theory and Evidence," Fordham Economics Discussion Paper Series dp2008-14, Fordham University, Department of Economics.
- Karacaovali, Baybars, 2006. "Productivity matters for trade policy : theory and evidence," Policy Research Working Paper Series 3925, The World Bank.
- Baybars Karacaovali, 2011.
"Trade Policy Determinants and Trade Reform in a Developing Country,"
201115, University of Hawaii at Manoa, Department of Economics.
- Baybars Karacaovali, 2011. "Trade Policy Determinants and Trade Reform in a Developing Country," Fordham Economics Discussion Paper Series dp2011-03, Fordham University, Department of Economics.
- Baybars Karacaovali, 2012. "Trade Policy Determinants and Trade Reform in a Developing Country: The Case of Colombia," Working Papers 201220R, University of Hawaii at Manoa, Department of Economics.
- Marcela Eslava & Marcela Melendez, 2009. "Politics, Policies and the Dynamics of Aggregate Productivity in Colombia," Research Department Publications 4633, Inter-American Development Bank, Research Department.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (UNIVERSIDAD DE LOS ANDES-CEDE).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.