| Measurement of Corporate Political Connection and Its Effects on Entrepreneur International Trade Preferences |
Received:October 06, 2017 Revised:October 06, 2017 |
Key Words: corporate political connection, international trade, Bayesian |
| Author Name | Affiliation | | Yilang Feng* | University of Michigan |
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Abstract: |
| This paper is an early investigation on how corporate political connection shapes firm owner preference on economic openness and international competition. Politically connected entrepreneurs and their enterprises (PCEs) usually exploit and benefit from their political resources, but this can lead to both supporting and opposing views on trade liberalization. To solve this puzzle, this paper proposes a theory that focuses on 1) a selection effect of political connection and 2) trade-related institutional development. With survey data on China joining the WTO, we develop a modified item response theory (IRT) model to measure political connection and find that Chinese PCEs held a less supportive view before joining WTO than their less connected counterparts. This suggests an anticipation that the imminent opening would neutralize the privileges of PCEs. By looking at trade liberalization, this paper offers a firm level analysis that political opposition to sustained economic reform may derive from the short-term winners, instead of the losers, in transitional societies. |
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