Pyramid capitalism: Cronyism, regulation, and firm productivity in Egypt

Ishac Diwan (), Philip Keefer and Marc Schiffbauer ()
Additional contact information
Marc Schiffbauer: World Bank

The Review of International Organizations, 2020, vol. 15, issue 1, No 8, 246 pages

Abstract: Abstract We present novel evidence suggesting that cronyism had a negative effect on economic growth in Egypt, during a period when international organizations praised the country for its reforms of business regulation. We identify 385 politically connected firms under the Mubarak regime. This large database allows us to show that 4-digit sectors that experienced crony entry between 1996 and 2006 exhibited lower aggregate employment growth subsequently than those that did not. In manufacturing, labor productivity grew more slowly in sectors that experienced crony entry. Ample, though not definitive evidence suggests that this effect was causal. Crony entry skewed the distribution of employment toward smaller, less productive firms; crony firms do not appear to have entered sectors that would have also grown more slowly even in the absence of crony entry; and they enjoyed multiple regulatory and fiscal privileges that reduced competition and investments by non-crony firms, including trade protection and energy subsidies. These privileges account for the higher profits of politically connected firms.

Keywords: Cronyism; Growth; Political connections; Productivity; Regulation; D72; D24; O47 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://link.springer.com/10.1007/s11558-018-9327-2 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Pyramid Capitalism: Cronyism, Regulation, and Firm Productivity in Egypt (2016)
Working Paper: Pyramid Capitalism: Cronyism, Regulation, and Firm Productivity in Egypt (2015)
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:spr:revint:v:15:y:2020:i:1:d:10.1007_s11558-018-9327-2

Ordering information: This journal article can be ordered from
http://www.springer. ... iology/journal/11558

DOI: 10.1007/s11558-018-9327-2

Access Statistics for this article

The Review of International Organizations is currently edited by A. Dreher

More articles in The Review of International Organizations from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().