Corporate Political Interests in Absentia
We formalize Zingales’ (2017) argument about the link between corporate economic characteristics and political influence in a setup that exhibits an inverse relationship between citizens’ participation in production and the protection offered to citizens who participate. In this setup, driven by citizens whose participation in production necessitates low protection, democracy may fail to offer protection to citizens-voters, thus boosting corporate profits. The corporation can push protection further downward by allowing less citizens in production, thus decreasing the mass of citizens who demand protection. This benefits corporate profits at the expense of aggregate production and citizens’ consumption. Industry concentration aggravates a corporation’s capability to gain political influence via its role as a gatekeeper to citizens’ participation in production.
Co-Author(s): Oriol Tejada