The Economic Returns of Firms’ Political Connections

Lucas Braga de Melo and Valdemar Pinho Neto
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Lucas Braga de Melo: Turku School of Economics, University of Turku, Finland
Valdemar Pinho Neto: EPGE/FGV

No 175, Discussion Papers from Aboa Centre for Economics

Abstract: This paper analyzes the economic returns to political connections in Brazilian local elections, focusing not only on traditional campaign donations but also on two novel channels: firms that provide goods or services to candidates during campaigns and firms’ owners affiliated with parties within a coalition running for mayor. Employing regression discontinuity and event study methods around close mayoral races, we find that politically connected firms substantially increase both their likelihood of securing procurement contracts and the value of those contracts, though without corresponding gains in employment or wages. This paper contributes to the literature on political connections by documenting the emergence of indirect political connections and public procurement allocation in a context of weak institutional constraints.

Keywords: political connections; procurement; firms (search for similar items in EconPapers)
JEL-codes: D72 D73 H72 (search for similar items in EconPapers)
Pages: 65
Date: 2026-02
New Economics Papers: this item is included in nep-soc
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