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The Politics of Market Selection

Abstract

This study seeks to determine the effects of an economic sector?s political power on the policies faced by its plants, its market survival probabilities, and finally, aggregate productivity. Data from the Colombian manufacturing sector at the plant level for the period 1990-1998 is used to estimate several empirical models. Additionally, several political power variables are constructed. First, we find that sector?s political power has a significant positive effect on the tariffs faced by its plants. In the second place, we find that a plant belonging to a more politically influential sector may survive in spite of lower productivity levels. Finally we calculate that, since the political power effect allows less productive plants to survive, aggregate productivity is decreased by an average of 9.86% per year. 

Autores:  Quintero, Luis Eduardo
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