Politicians at work. The private returns and social costs of political connections
AbstractWe quantify the private returns and social costs of political connections exploiting a unique longitudinal dataset that combines matched employer-employee data for a representative sample of Italian firms with administrative archives on the universe of individuals appointed in local governments over the period 1985-97. According to our results, the revenue premium granted by political connections amounts to 5% on average, it is obtained through changes in domestic sales but not in exports, and it is not related to improvements in firm productivity. The connection premium is positive for upstream producers for the public administration only, and larger (up to 25%) in areas characterized by high public expenditure and high levels of corruption. These findings suggest that the gains in market power derive from public demand shifts towards politically connected firms. We estimate such shifts reduce the provision of public goods by approximately 20%.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 709.
Date of creation: May 2009
Date of revision:
political connections; social welfare; productivity; employer-employee data;
Other versions of this item:
- Federico Cingano & Paolo Pinotti, 2013. "Politicians At Work: The Private Returns And Social Costs Of Political Connections," Journal of the European Economic Association, European Economic Association, vol. 11(2), pages 433-465, 04.
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-16 (All new papers)
- NEP-PBE-2009-08-16 (Public Economics)
- NEP-POL-2009-08-16 (Positive Political Economics)
You can help add them by filling out this form.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:CitEc Project, subscribe to its RSS feed for this item.
- Leandro DÂ’Aurizio & Livio Romano, 2013.
"Family firms and the Great Recession: out of sight, out of mind?,"
Temi di discussione (Economic working papers)
905, Bank of Italy, Economic Research and International Relations Area.
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"Board Composition, Political Connections and Performance in State-Owned Enterprises,"
9, Former Department of Economics and Public Finance "G. Prato", University of Torino.
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- Anna Menozzi & María Gutierrez Urtiaga & Davide Vannoni, 2010. "Board Composition, Political Connections and Performance in State-Owned Enterprises," Carlo Alberto Notebooks 185, Collegio Carlo Alberto.
- Murray, Cameron K., 2012. "Markets in political influence: rent-seeking, networks and groups," MPRA Paper 42070, University Library of Munich, Germany.
- Amore, Mario Daniele & Bennedsen, Morten, 2013. "The value of local political connections in a low-corruption environment," Journal of Financial Economics, Elsevier, vol. 110(2), pages 387-402.
- Franco Amatori & Matteo Bugamelli & Andrea Colli, 2011. "Italian Firms in History: Size, Technology and Entrepreneurship," Quaderni di storia economica (Economic History Working Papers) 13, Bank of Italy, Economic Research and International Relations Area.
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