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Do politicians affect firm outcomes? Evidence from connections to the German Federal Parliament

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  • Diegmann, André
  • Pohlan, Laura
  • Weber, Andrea

Abstract

We study how connections to German federal parliamentarians affect firm dynamics by constructing a novel dataset to measure connections between politicians and the universe of firms. To identify the causal effect of access to political power, we exploit (i) new appointments to the company leadership team and (ii) discontinuities around the marginal seat of party election lists. Our results reveal that connections lead to reductions in firm exits, gradual increases in employment growth without improvements in productivity. The economic effects are mediated by better credit ratings while access to subsidies or procurement contracts are documented to be of lower importance.

Suggested Citation

  • Diegmann, André & Pohlan, Laura & Weber, Andrea, 2024. "Do politicians affect firm outcomes? Evidence from connections to the German Federal Parliament," ZEW Discussion Papers 24-035, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:300014
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    References listed on IDEAS

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    1. Brown, Jeffrey R. & Huang, Jiekun, 2020. "All the president's friends: Political access and firm value," Journal of Financial Economics, Elsevier, vol. 138(2), pages 415-431.
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    6. G. Jacob Blackwood & Lucia S. Foster & Cheryl A. Grim & John Haltiwanger & Zoltan Wolf, 2021. "Macro and Micro Dynamics of Productivity: From Devilish Details to Insights," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(3), pages 142-172, July.
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    8. Joonkyu Choi & Veronika Penciakova & Felipe Saffie, 2021. "Political Connections, Allocation of Stimulus Spending, and the Jobs Multiplier," FRB Atlanta Working Paper 2021-13, Federal Reserve Bank of Atlanta.
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    Cited by:

    1. Sabrina Lucia Di Addario & Zhexin Feng & Michel Serafinelli, 2024. "Inventors' Coworker Networks and Innovation," Development Working Papers 497, Centro Studi Luca d'Agliano, University of Milano.
    2. Sabrina Di Addario & Zhexin Feng & Michel Serafinelli, 2024. "Inventors’ Coworker Networks and Innovation," CESifo Working Paper Series 11432, CESifo.

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    More about this item

    Keywords

    Politicians; Firm Performance; Identification; Political Connections;
    All these keywords.

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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