Crony Capitalism in Ukraine : Relationship between Political Connectedness and Firms' Performance
This study combines firm-level data and data on politically exposed people to explore correlation between firms' political connectedness and their economic performance in Ukraine. First, it estimates the share of politically connected firms in...
| Main Authors: | , , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/494271528822739302/Crony-capitalism-in-Ukraine-relationship-between-political-connectedness-and-firms-performance http://hdl.handle.net/10986/29900 |
| Summary: | This study combines firm-level data and
data on politically exposed people to explore correlation
between firms' political connectedness and their
economic performance in Ukraine. First, it estimates the
share of politically connected firms in Ukraine's
economy. Second, the study looks at how different the
performance of politically connected firms is from that of
their nonconnected peers. The analysis finds that 2 percent
of firms are politically connected, but they control over 20
percent of the total turnover and over 25 percent of the
assets of all Ukrainian companies. Over the past two
decades, politically connected firms used various channels
to access economic rents: public procurement, subsidized
loans, transfers from the budget, trade regulations that
restrict imports, privileged access to state assets through
privatizations, and beneficial tax regimes. There is a
strong negative correlation between political connection and
productivity. Politically connected firms are larger and
employ more people, but they are less productive and grow
slower in turnover and job creation. This may likely account
for lower economic growth and less competitive economy. |
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