EconPapers    
Economics at your fingertips  
 

The Politics of Market Selection

Luis Quintero ()

Revista Desarrollo y Sociedad, 2006

Abstract: This work seeks to determine the effect of political power of economic sectors in the policies their plants face, in their market survival probabilities, and in the aggregate productivity of the economy. Data from colombian manufacturing sector at the plant level for the period 1990-1998 is used to estimate several empirical models. Also, political power variables are constructed: dummy variables that indicate membership to economic associations and economic corporate groups, and an index that captures both the economic importance of the plant´s economic sector in the geographical region where it is located, and the electoral influence of that region in the national political scene. In the first place, we estimate the effect of political power on policy variables. For these, we use nominal tariffs, mainly because they show differential treatments between sectors, because they affect all sectors in the economy, and because they represent policies in a quantitatively way, and thus are subject to quantitative modeling. We found that political power of sectors has a significant and positive effect on the tariffs their plants face. This happens both when it comes from belonging to an organized group that can perform lobby activities and when it comes from the political support that the sector´s welfare implies for policy makers. In the second place, a market selection model is estimated to determine the effect of political power on the probability of exit of a plant. We found that a plant that belongs to a more politically influential sector can survive in the market with productivity levels that would otherwise make it go out of business (compared to plants belonging to sectors with less political power). Third, the economy´s aggregate productivity is calculated with and without the effect of political power. We find that, since this effect allows less productive plants to survive, aggregate productivity is decreased an average of 9.86% per year.

Keywords: Market Structure and performance; Policy making analysis; aggregate productivity; political processes (search for similar items in EconPapers)
JEL-codes: D72 D78 L10 O47 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
http://economia.uniandes.edu.co/revistadys/Articulo57_2.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:col:000090:003620

Access Statistics for this article

More articles in Revista Desarrollo y Sociedad from Universidad de los Andes - CEDE
Bibliographic data for series maintained by Universidad De Los Andes-Cede ().

 
Page updated 2021-10-17
Handle: RePEc:col:000090:003620