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Political Connections and Firms: Network Dimensions

Author

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  • Bussolo, Maurizio

    () (World Bank)

  • Commander, Simon

    () (IE Business School, Altura Partners)

  • Poupakis, Stavros

    () (University College London)

Abstract

Business and politician interaction is pervasive but has mostly been analysed with a binary approach. Yet the network dimensions of such connections are ubiquitous. We use a unique dataset for seven economies that documents politically exposed persons (PEPs) and their links to companies, political parties and other individuals. With this dataset, we can identify networks of connections, including their scale and composition. We find that all country networks are integrated having a Big Island. They also tend to be marked by small-world properties of high clustering and short path length. Matching our data to firm level information, we examine the association between being connected and firm-level attributes. The originality of our analysis is to identify how location in a network, including extent of ties and centrality, are correlated with firm scale and performance. In a binary approach such network characteristics are omitted and the scale and economic impact of politically connected business may be significantly mis/under-estimated. By comparing results of the binary approach with our network approach, we can also assess the biases that result from ignoring network attributes.

Suggested Citation

  • Bussolo, Maurizio & Commander, Simon & Poupakis, Stavros, 2018. "Political Connections and Firms: Network Dimensions," IZA Discussion Papers 11498, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11498
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    References listed on IDEAS

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    More about this item

    Keywords

    connections: PEPs; networks; rents;

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy

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