Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263727 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9797
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We study the economic implications of regional favoritism, a form of distributive politics that redistributes resources geographically within countries. Using enterprise surveys from low- and middle-income countries, we document that firms located close to leaders' birthplaces grow substantially in sales and employment after leaders assume office. Firms in favored areas also experience increases in sales per worker, wages, and measured total factor productivity. These effects are short-lived, and operate through rising (public) demand for the non-tradable sector. We calibrate a simple structural model of resource misallocation on our estimates. This exercise implies that favoritism reduces output by 0.5% annually.
Subjects: 
regional favoritism
firm performance
enterprise surveys
resource misallocation
JEL: 
D22
D72
O43
R11
Document Type: 
Working Paper
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