Industry leaders and political engagement

Chapter 3 shows evidence that business leaders are more likely to be politically engaged in Brazil (unlike the US case, for example). The chapter reveals the underlying market performance of businesses by exploring an exogenous variation in exchange rates in Brazil. It then connects their market performance to patterns of political engagement. The evidence suggests that in addition to making more campaign donations, they are trying to buy access to power, rather than pushing a policy agenda. The result implies that industry front-runners that could lead business coalitions toward reducing transaction costs actually prefer to solve their problems individually by buying privileged access to state agents, rather than by lobbying for an encompassing reformist agenda. The lack of a reformist coalition supports the low-level equilibrium sustaining crony capitalism.