Do politicians affect firm outcomes? : evidence from connections to the German Federal Parliament / André Diegmann, Laura Pohlan, Andrea Weber ; editor: Halle Institute for Economic Research (IWH) - Member of the Leibniz Association

Abstract

We examine how connections to German federal parliamentarians influence firm dynamics using a novel dataset linking politicians and election candidates to the universe of firms. To identify the causal effects of political access, we exploit (i) new appointments to the company leadership team and (ii) discontinuities around the marginal seat of party election lists. Results reveal that political connections reduce firm exits and gradually increase employment growth, with heterogeneous productivity effects depending on the political mandate. Incorporating data on credit ratings, subsidies, and procurement contracts allows us to identify the mechanisms driving the effects over the politician’s career.