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

Published online by Cambridge University Press:  20 December 2017

DAVID SZAKONYI
DAVID SZAKONYI*
Affiliation:
George Washington University
*
David Szakonyi is an Assistant Professor of Political Science, Department of Political Science, George Washington University and Research Fellow, International Center for the Study of Institutions and Development (ICSID), Moscow, Russia. Mailing address: 2115 G St NW, Suite 440, Washington, DC, 20052 ([email protected]).
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Abstract

Do businesspeople who win elected office use their positions to help their firms? Business leaders become politicians around the world, yet we know little about whether their commitment to public service trumps their own private interests. Using an original dataset of 2,703 firms in Russia, I employ a regression discontinuity design to identify the causal effect of firm directors winning seats in subnational legislatures from 2004 to 2013. First, having a connection to a winning politician increases a firm’s revenue by 60% and profitability by 15% over a 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.

Type
Research Article
Information
American Political Science Review , Volume 112 , Issue 2 , May 2018 , pp. 322 - 338
Copyright
Copyright © American Political Science Association 2017 

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Footnotes

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, Johannes Urpelainen, three anonymous reviewers, and the Journal's editor for their useful comments. I also benefited from feedback from seminar participants at George Washington, Columbia, MIT, Vanderbilt, Duke, Washington, and UCSD. This article 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 on work supported by the National Science Foundation Graduate Research Fellowship under Grant No. DGE-11-44155. All errors are my own.

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