Past event
Applied Microeconomics Seminar with Professor Mohamed Saleh, LSE The Power of Connections: Colonialism, Nationalism, and Corporate Performance in Egypt, 1890--1950
Mohamed is an Associate Professor at the London School of Economics, a Professor (on leave) at Toulouse School of Economics, and a Research Affiliate at CEPR. His work has been published in Econometrica, Journal of Economic History, Explorations in Economic History, and Journal of Development Economics, among other general interest and top field journals.
Abstract: The impact of political connections on firm performance has been widely studied. It is less known, though, whether this effect varies under the colonial and post-independence eras. Inspired by a nationalist agenda aiming at establishing an indigenous business elite, post-independence regimes often used connections with the emerging national private sector to counter the influence of established larger colonial-era foreign corporations. Using novel fine-grained data covering the universe of corporations, founders, and members of parliament and cabinet in colonial (1890–1923) and post-independence Egypt (1924–1950), we document those connections to the Egyptian political class lowered firm value before independence but increased it afterwards. Connections became lucrative after independence because they lowered entry rates in the industry, expedited the state authorization of incorporation, and reduced the exit hazard even after losses.