Abstract
Theoretical studies have emphasized the role firms play in shaping laws and regulations through political activities. This paper examines whether import-competing firms and exporting firms possess differing levels of political influence by using firm-level data from 27 Eastern European and Central Asian countries. To control for endogeneity, we estimate a multivariate probit model using a simulated maximum-likelihood algorithm. We find that exporting firms have stronger political influence than import-competing firms, indicating that more free trade policies are the likely outcome of political-rent seeking in these countries. The results have significant implications for countries’ economic growth and development.
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