Do Firms Benefit from the Revolving Door? Evidence from Japan

• In Event: Firms and their political connections

Abstract

A growing literature finds high returns to firms connected to legislative office. Less attention has been paid to benefits from bureaucratic connections. Yet recent evidence shows the groups actively contacting the legislature extensively contact bureaucrats as well. Private sector hiring of former civil servants - a process known as the revolving door, facilitates this practice. Leveraging a 2009 law requiring Japanese bureaucratic agencies to report all private sector hires of former civil servants, we construct the first comprehensive dataset of revolving door hires. We use the synthetic control method to test for systematic benefits that accrue to firms who hire former bureaucrats. We show that bureaucratic rehiring is associated with an increased likelihood of receipt of government contracts and investment. Finally, we test for stock market boosts from hiring of high-ranking former officials using an event study approach.

Authors

• Diana Stanescu, Princeton University

• Hikaru Yamagishi, Yale University

• Sayumi Miyano, Princeton University

• Trevor Incerti, Yale University