Friends in High Places

How do firms' political connections help them win procurement contracts and how can this be measured? This is the focus of Adam Szeidl’s current research project that he is jointly conducting with Miklos Koren. Using detailed firm-level panel data on Hungarian firms from 1992–2013, they classify a firm as connected to a political party if a representative of the firm is on the ballot for that party in a local or national election. They then evaluate how the share of left- and right-connected procurement winners varies depending on whether the left or the right has political power.

To get at mechanisms, the researchers also explore whether firms first win procurement contracts and then hire politicians, as career concerns would suggest, or first connect to a party and then win contracts, consistent with favour exchange. To learn about differences across layers of government, the researchers also explore the cross-section of municipalities.

Mr Szeidl's areas of research include social networks, behavioural economics and international trade. He is particularly interested in the economic effects of business connections, firm productivity in developing countries and applicable theories of psychological biases. Mr Szeidl has published in leading economics journals such as the Quarterly Journal of Economics and the American Economic Review.

Adam Szeidl is Professor of Economics at Central European University in Budapest, Hungary. Before returning to Budapest, he was Associate Professor with tenure, (2010–12) and Assistant Professor (2004–10) of Economics at the University of California, Berkeley. He received his PhD from Harvard University in 2004.