Past event
Department of Economics Seminar with Professor Andrea Weber, CEU Do Politicians Affect Firm Outcomes? Evidence from Connections to the German Federal Parliament
Professor Weber is an applied labor economist and her current research focuses on the interaction of labor markets with social insurance systems, the dynamics of unemployment, gender differences in the labor market, and the mobility of workers in the European Union.
Abstract: Do firms benefit from political connections and to what extent do connections between firms and politicians shape firm dynamics? This paper combines data on firm connections to German Bundestag politicians over the last two decades with the universe of German firms. We differentiate between hiring a politician and winning or losing access to political power through elections by comparing candidates who just won and just lost a seat in parliament. Based on an event-study design, hiring a politician causes firms to grow by 10 log points and reduces the exit probability by up to 8% points. Exploiting submitted party list seats in a fuzzy RDD with 254 discontinuities, winning access to parliament lowers market exit by 11% points. Our results provide evidence of a reallocation of resources due to firms seeking preferential treatments, measured in the form of public procurement contracts, economic subsidies, and access to credit.