Entrepreneurs Establishing Political Connection

Abstract

Political connection is multiform, and each of its components may affect the enterprise in different ways. In this article, we have studied the advantages of two types of political connections with data from private enterprises. An enterprise can financially support a political party’s campaigns or support only a single candidate of a political party. The enterprises choose between these two types of political connections according to the respective profitability of each. We make use of primary data collected in 2014 from enterprises that take part in Burkina Faso’s public procurements to analyze the expenses and profits linked to each of these political connections. The database has helped us to identify three categories of enterprises according to the type of political connection being implemented. The first category of enterprises financially supports only political parties, and the second finances only politicians. The third category is composed of those that finance both politicians and political parties. The data show that the enterprises that establish both types of political connections bear more expenses. These enterprises also earn more public contracts. The difference in treatment between these three types of enterprises is only viewed at the level of the number of public contracts obtained. This process allows us to say that the only advantage linked to the establishment of political connection in Burkina Faso is the profitability linked to government procurements. Our data do not address the hypothesis of tax reduction as a benefit of a given category.