Political Liberalization and State Capture by Business Interests

Motivated by observations from three African countries, we explore the relationship between political competition and state capture when business leaders can fund political candidates’ campaigns to enhance access to a rent. A surprising result is that, with a unified business sector, and with a given rent, the risk of capture first increases with the number of candidates, before decreasing and then vanishing. With multiple firms sharing the rent, capture is enhanced or attenuated depending on the credibility of politicians’ promises and firms’ rivalry. An important policy implication is that to limit state capture political liberalization is better postponed until after economic transformation is well under way.