Politics in the Firm
Emanuele Colonnelli, Assistant Professor of Finance, Liew Family Junior Faculty Fellow and Fama Faculty Fellow
I study the role of politics in firm decisions using new data on the political affiliation of the universe of business owners and workers in Brazil in the 2000-2019 period. I establish several new facts. First, I document substantial political segregation in the workplace: workers of the same party work together. Second, owners of a given party are more likely to employ workers of their same partisan affiliation. Third, I identify a large political wage premium: within a firm, workers belonging to the same political party as their owner are paid more. All these empirical facts are larger in magnitudes than analogous ones I establish along gender and racial lines, thus highlighting the importance of individual political views in shaping firm decisions and labor market outcomes. I am asking for funding to collect experimental survey data on firm owners and workers in Brazil and the U.S. to identify specific economic channels explaining the facts I establish in the administrative data.