Business and informal networks. Post-Election Employment Trends in Italy

Title: Business and informal networks. Post-Election Employment Trends in Italy

Abstract: Corruption affects economic activities and how individuals interact in the private and public sectors. A form of private sector corruption is favoritism, or clientelism, where a person or group receives unfair preferential treatment at the expense of others. Our study aims to investigate how municipal elections in Italy impact employment levels in companies due to clientelism, known as Political Raccomandazione. Raccomandazione is a widespread phenomenon in Italian culture that refers to the use of social connections to get things done. Empirical research on this phenomenon is challenging due to the embarrassment and stigma associated with it. The novelty of this research project lies in combining empirical economic analysis with qualitative data (context specificity analysis) from ethnographic interviews. The long-term, intimate approach of ethnography allows for building trust that facilitates data gathering despite the tendency for secrecy. We combine a large dataset of Italian firms with data from the Italian Ministry of Interior on municipalities with local elections by year. We perform a staggered difference-in-difference analysis and an event study. Preliminary findings show an increase in the level of employment at the firm level after local elections. This effect is more pronounced in small firms  with a lower leverage level.