Politicians doing business: Evidence from Mozambique

Abstract

This study shows how political elites and their families derive private business benefits from public office through ownership of firms. Looking over more than four decades in Mozambique, we combine a new database of politically exposed persons (PEPs) with the universe of formally-registered firms and their beneficial owners. Based on generalized event study methods, we differentiate between static and dynamic effects of political office on metrics of private business capital. We find that becoming a PEP leads to a 24% increase in the likelihood of firm ownership and a 350% gain in information capital. These effects accumulate over time and persist after leaving office. We further show that (albeit smaller) gains occur among family members, indicating consolidation of private sector influence within political dynasties. Our insights demonstrate the value of public firm registries for political economy research in low-income settings.