Firm Size and Corporate Political Influence

53 Pages Posted: 1 Nov 2023 Last revised: 6 Jan 2025

Date Written: February 4, 2024

Abstract

In a setup that exhibits an inverse relationship between citizens' employment and the minimum wage offered to employed citizens, democratic elections yield either a low or a high minimum wage, depending on the political salience of minimum wage. In either case, a corporation can proactively set its workforce size in order to push the minimum wage further downward. We show that the capacity for a large workforce enhances corporate political influence. Yet, we also show that the corporation chooses to downsize in equilibrium. By doing so, the corporation decreases the share of citizens who demand a higher minimum wage, while keeping up the pressure for a lower minimum wage from the unemployed. This boosts corporate profits at the expense of aggregate production and citizens' consumption.

Keywords: voting, political influence, corporate strategy, firm size

JEL Classification: D21, D72, L25

Suggested Citation

Papageorgiou, Stylianos and Tejada, Oriol, Firm Size and Corporate Political Influence (February 4, 2024). Available at SSRN: https://ssrn.com/abstract=4592207 or http://dx.doi.org/10.2139/ssrn.4592207

Stylianos Papageorgiou (Contact Author)

University of Cyprus ( email )

Cyprus

Oriol Tejada

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007
Spain

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