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Patrons or Clients? Measuring and Experimentally Evaluating Political Connections of Firms in Morocco and Jordan

Robert Kubinec ()
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Robert Kubinec: Princeton University

No 1280, Working Papers from Economic Research Forum

Abstract: I use an original survey of firm employees in Morocco and Jordan to construct an index of political-connectedness that collapses several possible indicators of connectedness down to a single latent dimension. To do so, I employ item-response theory on a subset of questions from the survey for which I have a prior theoretical reason to believe that these factors should either be caused by or cause political-connectedness. With this index, I can better understand political-connectedness as a continuous measure that reflects the broad range of political interactions firms may have rather than as a dichotomous measure of connected versus nonconnected firms. I also employ an experimental design embedded in the survey that simulated a hypothetical interaction between the firm and a party offering political benefits in exchange for resources in order to understand if this measure of political connectedness can predict political activity across domains. I show that politically-connected firms are able to exchange political loyalty to regimes for lighter regulatory burdens and access to protected markets that insulate them from competition.

New Economics Papers: this item is included in nep-ara and nep-pol
Date: 2018-12-26, Revised 2018-12-26
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