"The Economic Implications of Connections between Corporations and Politicians"

The RCGA program on Global Economics presents “The Economic Implications of Connections between Corporations and Politicians” by Cihan Artunc, assistant professor of economics, Middlebury College.

How do firms benefit from establishing close connections with political actors? Political connections can allow firms to secure tax exemptions or subsidies, receive priority in government contracts, and enjoy lower costs in navigating bureaucracy. But the extent of corporate-political ties can impose economic and social costs. It can distort competition, slow down creative destruction, and reduce firm dynamism. The question is significant for late industrializers, which had to grapple with encouraging large-scale firms, the potentially deleterious social effects of limited liability, and colonial legacies. We take up this question in Egypt between 1890 and 1950, when the country transitioned from British colonial rule to semi-independence. During the colonial period, political connections had no effect on firm outcomes. After independence, connections raised firm value, improved firm survival, and eased barriers to entry. Corporations benefited from their connections by enjoying less competitive pressure from potential entrants.

To join this webinar, use this Zoom link or visit the Rohatyn Center for Global Affairs events.