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IZA Discussion Paper No. 11498
April 2018
Political Connections and Firms: Network Dimensions

published in: Oxford Economic Papers, 2023, 75 (1), 256–280,

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.

Communications
Mark Fallak
mark.fallak@liser.lu
+352 585-855-526
World of Labour
Olga Nottmeyer
olga.nottmeyer@liser.lu
+352 585-855-501
Network Coordination
Christina Gathmann
christina.gathmann@liser.lu

The IZA@LISER Network is a global community of scholars dedicated to excellence in labor economics and related fields, now coordinated at the Luxembourg Institute of Socio-Economic Research (LISER) following its transition from Bonn.

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