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Businesspeople in Elected Office: Identifying Private Benefits from Firm-Level Returns

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  • SZAKONYI, DAVID

Abstract

Do businesspeople who win elected office use their positions to help their firms? Business leaders become politicians around the world, yet we know little about whether their commitment to public service trumps their own private interests. Using an original dataset of 2,703 firms in Russia, I employ a regression discontinuity design to identify the causal effect of firm directors winning seats in subnational legislatures from 2004 to 2013. First, having a connection to a winning politician increases a firm’s revenue by 60% and profitability by 15% over a term in office. I then test between different mechanisms, finding that connected firms improve their performance by gaining access to bureaucrats and not by signaling legitimacy to financiers. The value of winning a seat increases in more politically competitive regions but falls markedly when more businesspeople win office in a convocation. Politically connected firms extract fewer benefits when faced with greater competition from other rent-seekers.

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  • Szakonyi, David, 2018. "Businesspeople in Elected Office: Identifying Private Benefits from Firm-Level Returns," American Political Science Review, Cambridge University Press, vol. 112(2), pages 322-338, May.
    • Handle: RePEc:cup:apsrev:v:112:y:2018:i:02:p:322-338_00
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    2. Israel Marques II, 2017. "Political Connections and Non-Traditional Investment: Evidence from Public-Private Partnerships in Vocational Education," HSE Working papers WP BRP 56/PS/2017, National Research University Higher School of Economics.
    3. Tkachenko, Andrey & Esaulov, Daniil, 2020. "Autocratic governors in public procurement," European Journal of Political Economy, Elsevier, vol. 61(C).
    4. Marques, Israel & Remington, Thomas & Bazavliuk, Vladimir, 2020. "Encouraging skill development: Evidence from public-private partnerships in education in Russia’s regions," European Journal of Political Economy, Elsevier, vol. 63(C).
    5. Bai, Tao & Chen, Stephen & Xu, Youzong, 2021. "Formal and informal influences of the state on OFDI of hybrid state-owned enterprises in China," International Business Review, Elsevier, vol. 30(5).
    6. Čellárová, Katarína & Staněk, Rostislav, 2024. "Contest and resource allocation: An experimental analysis of entitlement and self-selection effects," European Journal of Political Economy, Elsevier, vol. 82(C).
    7. David Szakonyi, 2018. "Private Sector Policymaking," Working Papers 2018-8, The George Washington University, Institute for International Economic Policy.
    8. Stommes, Drew & Aronow, P. M. & Sävje, Fredrik, 2023. "On the Reliability of Published Findings Using the Regression Discontinuity Design in Political Science," I4R Discussion Paper Series 22, The Institute for Replication (I4R).
    9. Kubinec, Robert, 2018. "Politically-Connected Firms and the Military-Clientelist Complex in North Africa," SocArXiv mrfcu, Center for Open Science.
    10. Thomas Braendle & Alois Stutzer, 2017. "Voters and Representatives: How Should Representatives Be Selected?," CREMA Working Paper Series 2017-05, Center for Research in Economics, Management and the Arts (CREMA).
    11. CHEN, Xuezheng & GUI, Lin & WU, Tao & ZHANG, Jun, 2024. "A theory of symbiotic corruption," Journal of Comparative Economics, Elsevier, vol. 52(2), pages 478-494.
    12. Lei, Zhenhuan & Nugent, Jeffrey B., 2018. "Coordinating China's economic growth strategy via its government-controlled association for private firms," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1273-1293.
    13. Makarin, Alexey & Piqué, Ricardo & Aragón, Fernando, 2020. "National or sub-national parties: Does party geographic scope matter?," Journal of Development Economics, Elsevier, vol. 146(C).
    14. Detkova, Polina & Tkachenko, Andrey & Yakovlev, Andrei, 2021. "Gender heterogeneity of bureaucrats in attitude to corruption: Evidence from list experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 217-233.
    15. Timm Betz & Amy Pond, 2020. "Political Ownership," Munich Papers in Political Economy 01, Munich School of Politics and Public Policy and the School of Management at the Technical University of Munich.
    16. L. Jason Anastasopoulos, 2019. "Principled estimation of regression discontinuity designs," Papers 1910.06381, arXiv.org, revised May 2020.

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