Ishac Diwan, Jamal Ibrahim Haidar, 18 January 2020

Firm-level political connections are widespread. This column examines whether they affect employment decisions in Lebanon, a country where the majority of university students think that connections are important for finding jobs and many admit to having used them. While politically connected firms create more jobs than unconnected firms, the presence of such firms in a sector is correlated with lower aggregate job creation. This finding is consistent with the hypothesis that unfair competition from politically connected firms hurts unconnected competitors so much that aggregate growth in the sector is affected negatively.

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