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Do Political Connections Reduce Job Creation? Evidence from Lebanon

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  • Ishac Diwan
  • Jamal Ibrahim Haidar

    (Harvard University)

Abstract

Using firm-level census data, we determine how politically-connected firms (PCFs) reduce job creation in Lebanon. After observing that large firms account for the bulk of net job creation, we find that PCFs are larger and create more jobs, but are also less productive, than non-PCFs in their sectors. On a net basis, at the sector-level, each additional PCF reduces jobs created by 7.2% and jobs created by non-PCFs by 11.3%. These findings support the notion that politically-connected firms are used for clientelistic purposes in Lebanon, exchanging privileges for jobs that benefit their patrons’ supporters.

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  • Ishac Diwan & Jamal Ibrahim Haidar, 2016. "Do Political Connections Reduce Job Creation? Evidence from Lebanon," Working Papers 1054, Economic Research Forum, revised 10 2016.
    • Handle: RePEc:erg:wpaper:1054
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    Cited by:

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    2. Caroline Krafft & Reham Rizk, 2018. "The Promise and Peril of Youth Entrepreneurship in MENA," Working Papers 1257, Economic Research Forum, revised 19 Nov 2018.
    3. Mounir Mahmalat & Denise Sumpf, 2020. "Entrepreneurship And Governance In The Arab Region — A Review Of Recent Literature To Prioritize Policy Challenges," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 25(01), pages 1-26, April.
    4. Mounir Mahmalat & Declan Curran, 2020. "Fractionalization and reform: a framework of political collaboration with application to Lebanon," Economics of Governance, Springer, vol. 21(2), pages 187-214, June.
    5. El-Haddad Amirah, 2020. "Picking Winners: Identifying Leading Sectors for Egypt and Tunisia Using the Product Space Methodology," Review of Middle East Economics and Finance, De Gruyter, vol. 16(1), pages 1-80, April.
    6. Hany Abdel-Latif & Hassan Aly, 2019. "Are politically connected firms turtles or gazelles? Evidence from the Egyptian uprising," Working Papers 1304, Economic Research Forum, revised 2019.
    7. World Bank, 2017. "Towards Privilege-Resistant Economic Policies in MENA," World Bank Publications - Reports 27525, The World Bank Group.
    8. El-Haddad, Amirah, 2020. "Redefining the social contract in the wake of the Arab Spring: The experiences of Egypt, Morocco and Tunisia," World Development, Elsevier, vol. 127(C).
    9. El-Haddad, Amirah, 2018. "Exporting for growth: identifying leading sectors for Egypt and Tunisia using the Product Space Methodology," IDOS Discussion Papers 25/2018, German Institute of Development and Sustainability (IDOS).
    10. Davide Luca, 2018. "Picking Winners at the Ballot Box: Votes and Local Economic Growth in Turkey," Working Papers 1232, Economic Research Forum, revised 10 Oct 2018.

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    More about this item

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy

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