Beyond Political Connections : A Measurement Model Approach to Estimating Firm-level Political Influence in 41 Economies
This paper considers the political influence of private firms. While such influence is frequently discussed, there is limited analysis of how firms combine political interactions, and under what conditions, to gain influence. The exception is the l...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
Washington, DC : World Bank
2022
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/099855207052233298/IDU0158ecaac01be104fd80a04a03c9cf1992a74 http://hdl.handle.net/10986/37646 |
| Summary: | This paper considers the political
influence of private firms. While such influence is
frequently discussed, there is limited analysis of how firms
combine political interactions, and under what conditions,
to gain influence. The exception is the large literature on
firms with political connections, with findings generally
showing large gains to firms with those direct
relationships. This paper extends the discussion of
influence beyond political connections alone and uses a rich
firm-level data set from 41 economies, which includes
information on several interactions with political actors.
Using a Bayesian item response theory (IRT) measurement
model, an index of Political Influence is estimated, with
the prior assumption that political connections yield more
influence. Membership in a business association is found to
enhance influence, while such influence is offset by bribes,
state ownership, firm size, and a reliance on collective
lobbying. Political Influence is found to be broadly higher
in economies with poorer governance but more dispersed in
those with better governance. Within economies, higher
influence is associated with a higher likelihood of
reporting a small number of competitors, higher sales, and
lower labor inputs relative to sales. These findings are
robust across several models that incorporate
high-dimensional fixed effects, incorporating measurement
error in the index, and varying these relationships over
several governance measures. |
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