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Working Paper

Pyramid Capitalism : Political Connections, Regulation, and Firm Productivity in Egypt

EMPLOYMENT FINANCIAL SERVICES AUTOMOBILE HOLDING COMPANIES COMPETITORS DOMAINS EQUIPMENT BUSINESS OPPORTUNITIES PARTY FINANCIAL MANAGEMENT TELECOMMUNICATION GUARANTEES ENTERPRISE SURVEY VIDEO INFORMATION ENTREPRENEURS ENTREPRENEURIAL SKILL MANUFACTURERS COMPANIES MARKET SHARES TRANSMISSION LOAN TRACEABILITY FIRM SIZE PRICE RETAIL TRADE LISTED COMPANIES TIME PERIOD PC BUSINESS RELATIONS BRANCH COMPUTER CUSTOMS CLEARANCE OPEN ACCESS TELEVISION NEW TECHNOLOGIES INSTITUTIONS ADVERTISING DATA MARKET ENTRY COLLUSION GOVERNMENT REGULATIONS FINANCIAL INSTITUTION TELECOMMUNICATIONS FIRM SIZES INCOME INEQUALITY LICENSE REGULATORY BURDEN CUSTOMS PRODUCTIVITY GOVERNMENT CONTRACTS TELEPHONY GLOBALIZATION BUSINESS SERVICES BARRIERS TO ENTRY MARKETS FIRM LAWYERS WEB LINKS LENDERS LOANS LICENSING SUBSIDIES RADIO STORES GOVERNMENT SERVICES TRANSACTIONS MANUFACTURING USERS INTERNATIONAL STANDARDS GRANT TRANSACTION INVESTORS FIRMS INSPECTION PROCUREMENT RESULTS MARKET PRICES VALUE REGULATORY ENVIRONMENT ELECTRICITY MACROECONOMICS NETWORKS FINANCIAL PERFORMANCE ENTERPRISE PRODUCT CATEGORY EXPORT PROMOTION JOB CREATION RETAIL SALE PRIVATE SECTOR MARKET COMPANY MARKET COMPETITION ADMINISTRATION SHAREHOLDERS RESULT TAXATION GOVERNMENT POLICIES ECONOMIC DEVELOPMENT MANUFACTURING INDUSTRIES INVESTOR LAND LICENSES BUSINESS SECTOR BUSINESS PERFORMANCE PUBLIC ADMINISTRATION BUSINESS” INDICATORS INSPECTIONS GOVERNMENT SERVICE INNOVATION ECONOMIC ACTIVITIES INSTITUTION PROFIT COMMUNICATION BUSINESS REGULATIONS SMALL FIRMS GOVERNMENT CONTRACT DATABASE PROFITS TECHNOLOGIES SEE GROWTH POTENTIAL MOTION PICTURE GUARANTEE PRICES USES INNOVATIONS
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World Bank, Washington, DC
Middle East and North Africa | Egypt, Arab Republic of
2015-07-20T15:28:40Z | 2015-07-20T15:28:40Z | 2015-07

This paper uses an original database of 469 politically connected firms under the Mubarak regime in Egypt to explore the economic effects of close state-business relations. Previous research has shown that political connections are lucrative. The paper addresses several questions raised by this research. Do connected firms receive favorable regulatory treatment? They do: connected firms are more likely to benefit from trade protection, energy subsidies, access to land, and regulatory enforcement. Does regulatory capture account for the high value of connected firms? In the sample, regulatory capture as revealed by energy subsidies and trade protection account for the higher profits of politically connected firms. Do politically connected firms hurt aggregate growth? The paper identifies the growth effects of the entry of politically connected firms by comparing detailed 4-digit sectors where they entered, between 1996 and 2006, and sectors that remained unconnected. The entry of connected firms into new, modern, and previously unconnected sectors slows aggregate employment growth and skews the distribution of employment toward less productive, smaller firms.

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