Do Political Connections Reduce Job Creation? Evidence from Lebanon - Economic Research Forum (ERF)

Do Political Connections Reduce Job Creation? Evidence from Lebanon

Ishac Diwan and Jamal Ibrahim Haidar

October, 2016


31 pages

D4. Market Structure and Pricing
L5. Regulation and Industrial Policy
L1. Market Structure, Firm Strategy, and Market Performance
J3. Wages, Compensation, and Labor Costs
J2. Demand and Supply of Labor

Using firm-level census data, we determine how politically-connected firms (PCFs) reduce job creation in Lebanon. After observing that large firms account for the bulk of net job creation, we find that PCFs are larger and create more jobs, but are also less productive, than non-PCFs in their sectors. On a net basis, at the sector-level, each additional PCF reduces jobs created by 7.2% and jobs created by non-PCFs by 11.3%. These findings support the notion that politically-connected firms are used for clientelistic purposes in Lebanon, exchanging privileges for jobs that benefit their patrons’ supporters.


باستخدام  بيانات التعداد على مستوى الشركات، نقوم تحديد إمكانية الشركات المرتبطة سياسيا للحد من خلق فرص العمل في لبنان. بعد أن استحوذت الشركات الكبيرة على الجزء الأكبر من صافي خلق فرص العمل، نجد أن هذه الشركات أكبر وتستطيع خلق المزيد من فرص العمل، ولكنها أقل إنتاجية، من مثيلاتها في قطاعاتها. وعلى الأساس الصافي على مستوى القطاع، كل الشركات المرتبطة سياسيا تقلل من فرص العمل بنسبة 7.2 في المائة وفرص العمل التي تخلقها الشركات غير المرتبطة سياسيا -بنسبة 11.3 في المائة. وتدعم هذه النتائج فكرة أن تستخدم شركات مرتبطة سياسيا لأغراض تابعة في لبنان، وتبادل الامتيازات للوظائف التي تستفيد منها رعاة الداعمين

Research Fellows

Ishac Diwan

Chair Arab World, Paris Sciences et Lettres, visiting researcher at the Paris School of Economics

Jamal Ibrahim Haidar



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