Do Politicians Affect Firm Outcomes? Evidence from Connections to the German Federal Parliament by Andrea Weber

Join us for the latest Applied Economics Research Seminar Series event, Autumn Term 2023.

Andrea Weber, from the Economics Department at the Central European University, will present this seminar on Do Politicians Affect Firm Outcomes? Evidence from Connections to the German Federal Parliament.

Abstract

This paper studies whether German firms benefit from political connections by appointing a member of the federal government in a corporate leadership position. Our analysis is based on combined data on candidates in federal elections, elected members of parliament, and the universe of German firms. To evaluate the effect of a political connection on firm outcomes we use two designs. First, we adopt an event study design we to evaluate the change in firm outcomes after appointing a politician versus a non-politician on the corporate leadership team. Second, we exploit discontinuities in the election system around marginal seats at the party, state, and election level comparing firms with leadership team members who win or do not win a mandate. Our results show that appointing a politician is related to increases in firm size and a reduction of firm exits. Winning a political mandate by an incumbent leadership team member is also related to reduced exits but has no effect on firm size. We do not find significant effects of political connections on firm level productivity. As potential mechanism driving the firm level effects from political connections, we identify improved access to credit, subsidies, and public procurement contracts.

The seminar will begin with a presentation and will end with a Q and A session.

It will be held in the Economics Common Room at 2pm on Wednesday 29th November. This event is open to all levels of study and is also open to the public. To register your place and gain access to the webinar, please contact the seminar organisers.

This event is part of the Applied Economics Research Seminar Series.