Businesspeople in Elected Office: Identifying Private Benefits from Firm-Level Returns

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Authors David Szakonyi
Journal/Conference Name AMERICAN POLITICAL SCIENCE REVIEW
Paper Category
Paper Abstract Do businesspeople that win elected office use their positions to help their firms? Businessperson politicians are common worldwide, but little is known about the consequences of their entrance into politics. Using an original dataset of 2,706 firms in Russia, I employ a regression discontinuity design to identify the causal effect of firm directors winning seats in subnational legislatures in 2004-2013. I show that having a connection to a winning candidate increases a firm’s revenue by 60% and profit margin by 15% over their term in office. I then test between different mechanisms, finding that connected firms improve their performance by gaining access to bureaucrats, and not by signaling legitimacy to financiers. The value of winning a seat increases in more politically competitive regions, but falls markedly when more businesspeople win office in a convocation. Politically connected firms extract fewer benefits when faced with greater competition from other rent-seekers. ∗Assistant Professor of Political Science, Department of Political Science, George Washington University and International Center for the Study of Institutions and Development (ICSID), Moscow, Russia. Mailing Address: 2115 G St NW, Suite 440, Washington, DC, 20052, 202994-9231, dszakonyi@gwu.edu. I thank Quintin Beazer, Michael Best, Noah Buckley-Farlee, Bo Cowgill, Tim Frye, Jonas Hjort, Phil Keefer, Yegor Lazarev, Eddy Malesky, Yotam Margalit, Israel Marques, Will Pyle, John Reuter, Camille-Strauss Kahn, and Johannes Urpelainen for their useful comments. This material was prepared within the framework of the Basic Research Program at the National Research University Higher School of Economics (HSE) and supported within the framework of a subsidy granted to the HSE by the Government of the Russian Federation for the implementation of the Global Competitiveness Program. It also is based upon work supported by the National Science Foundation Graduate Research Fellowship under Grant No. DGE-11-44155. All errors are my own.
Date of publication 2016
Code Programming Language R
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