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Rent-seeking in elite networks

Rainer Haselmann (), David Schoenherr and Vikrant Vig

No 132, SAFE Working Paper Series from Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt

Abstract: We employ a unique dataset on members of an elite service club in Germany to investigate how social connections in elite networks affect the allocation of resources. Specifically, we investigate credit allocation decisions of banks to firms inside the network. Using a quasi-experimental research design, we document misallocation of bank credit inside the network, with bankers with weakly aligned incentives engaging most actively in crony lending. Our findings, thus, resonate with existing theories of elite networks as rent extractive coalitions that stifle economic prosperity.

JEL-codes: F34 F37 G21 G28 G33 K39 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-net
Date: 2017
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