Political Connections Reduce Job Creation: Firm-level Evidence from Lebanon

Second Author's Department

Economics Department

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https://doi.org/10.1080/00220388.2020.1849622

Document Type

Research Article

Publication Title

Journal of Development Studies

Publication Date

1-1-2021

doi

10.1080/00220388.2020.1849622

Abstract

Using firm-level data, we document that politically connected firms (PCFs) create more jobs than unconnected firms in Lebanon. We observe, however, that the presence of PCFs in a sector is correlated with lower job creation. Although causality is difficult to establish due to endogeneity issues, we find that PCFs expand, and non-PCFs retract, more around elections. Our findings are consistent with the hypothesis that unfair competition by PCFs hurts unconnected competitors so much that aggregate employment growth in the sector is affected negatively.

First Page

1373

Last Page

1396

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