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The Economic Returns of Firms’ Political Connections

Author

Listed:
  • Lucas Braga de Melo

    (Turku School of Economics, University of Turku, Finland)

  • Valdemar Pinho Neto

    (EPGE/FGV)

Abstract

This paper analyzes the economic returns to political connections in Brazilian local elections, focusing not only on traditional campaign donations but also on two novel channels: firms that provide goods or services to candidates during campaigns and firms’ owners affiliated with parties within a coalition running for mayor. Employing regression discontinuity and event study methods around close mayoral races, we find that politically connected firms substantially increase both their likelihood of securing procurement contracts and the value of those contracts, though without corresponding gains in employment or wages. This paper contributes to the literature on political connections by documenting the emergence of indirect political connections and public procurement allocation in a context of weak institutional constraints.

Suggested Citation

  • Lucas Braga de Melo & Valdemar Pinho Neto, 2026. "The Economic Returns of Firms’ Political Connections," Discussion Papers 175, Aboa Centre for Economics.
    • Handle: RePEc:tkk:dpaper:dp175
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    Keywords

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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