Political Connections and Firms: Network Dimensions

54 Pages Posted: 14 May 2018

See all articles by Maurizio Bussolo

Maurizio Bussolo

World Bank - Chief Economist Office for Europe and Central Asia

Simon John Commander

London Business School; IZA Institute of Labor Economics

Stavros Poupakis

University College London

Multiple version iconThere are 2 versions of this paper

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.

Keywords: connections: PEPs, networks, rents

JEL Classification: L14, L53, P26

Suggested Citation

Bussolo, Maurizio and Commander, Simon John and Poupakis, Stavros, Political Connections and Firms: Network Dimensions. IZA Discussion Paper No. 11498. Available at SSRN: https://ssrn.com/abstract=3177373

Maurizio Bussolo (Contact Author)

World Bank - Chief Economist Office for Europe and Central Asia ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://https://blogs.worldbank.org/team/maurizio-bussolo

Simon John Commander

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Stavros Poupakis

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

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