Business and the State in Developing Economies

Session Submission Type: Full Paper Panel

Session Description

This panel brings together cutting-edge research on the intersection between state, business and development in low and middle-income economies. Together these papers make two contributions. First, in marshaling original data from developing contexts, they nuance prevailing expectations of the developmental consequences of close ties between public and private sector actors in weak institutional environments. Second, each paper presents creative strategies in identifying connections between state and business, including both traditional and online surveys, trade data and data on government repression.

Bhandari examines how political connections between business owners and bureaucrats in Senegal influence bureaucratic discretion over access and the enforcement of regulations. Leveraging original survey data of over 700 business associations, he demonstrates that politically connected bureaucrats are more likely to grant connected firms preferential access and developmental assistance. In contrast, Bozcaga and Christia’s work in Turkey suggests that political connections between bureaucrats and business elites may in fact promote developmental outcomes, especially where state capacity is weak. They map the political makeup of Turkey’s civil service by collecting data on the Erdogan government’s purge of over 100,000 civil servants affiliated with the Gulenist movement. They find that Islamist service provision is highly dependent on the mobilization of local business elites.

The panel’s last two papers explore the relationship between political connections and development in globalizing markets. Eibl and Malik capitalize on a EU trade policy shock in Egypt to reveal that politically connected firms were more likely to benefit from alternative, technical barriers to trade following the removal of tariffs. Connections may thus help liberalizing regimes compensate connected firms with new forms of protectionism while undergoing economic reform. Kubinec et al’s paper suggests that political connections can encourage Foreign Direct Investment. Using a unique survey of firms in Venezuela, Ukraine and Egypt, they show that firms with political connections, as well as a credible threat of exit, face the lowest expropriation risks.

Together, these papers represent theoretically sophisticated, rigorous, and multi-method illustrations of how political connections in the private sector structure patterns of local and international development. Covering a variety of contexts, they advance our understanding of the complexities of connections, state-business relations and development.

Sub Unit

• Division 6: Political Economy

Individual Presentations

• The Bureaucratic Origins of Preferential Access to Economic Growth. - Abhit Bhandari, Temple University

• Imams and Businessmen: Islamist Service Provision in Turkey - Tugba Bozcaga, King's College London; Fotini Christia, Massachusetts Institute of Technology

• Cronyism and Partial Liberalization in Mubarak’s Egypt - Ferdinand Eibl, King's College London

• What Determines Political Risk?: The Role of Political Connections - Robert Kubinec, Princeton University; Haillie Na-Kyung Lee, Seoul National University; Andrey Tomashevskiy, Rutgers University

Chair

• Kristin E. Fabbe Harvard Business School

Discussants

• David Szakonyi Higher School of Economics

• Steve Monroe Yale-NUS College