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The Rise of a Network: Spillover of Political Patronage and Cronyism to the Private Sector
In this paper (joint with David Schoenherr), we document that networks that gain access to political power also gain control over the resource allocation in the private sector. Using micro-level data on bank loans, firm financials, and CEOs, and exploiting variation in network links for the same firm across lenders before and after the Korean presidential election in 2007, we find that firms whose CEOs share the same alumni network (Korea University) as the president received more credit at a lower rate from both government and private banks, relative to firms whose CEOs are not from KU, despite higher default rates. While the prior literature treats cronyism in the government and private sectors as independent sources of inefficiencies (i.e., Khwaja and Mian 2005), we show that, in fact, cronyism in both sectors is linked in a way that drastically amplifies allocative distortions.

• Terry S. Moon, Assistant Professor, University of British Columbia (Presenter)
• Ryan Kim, Assistant Professor, School of Advanced International Studies (SAIS), Johns Hopkins University (Discussant)
• Jungmin Lee, Professor, Seoul National University (Moderator)
This joint webinar series between Seoul National University and University of California San Diego is designed to be a forum for discussion of new research and major policy issues in Korea. We hope that you will join us. This series has received generous support from the Korea Foundation and the National Research Foundation of Korea (NRF-2020S1A3A2A02104190).

Nov 1, 2021 05:00 PM in Pacific Time (US and Canada)

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Ryan Kim
Assistant Professor of International Economics @Johns Hopkins University School of Advanced International Studies
Ryan Kim is an Assistant Professor of International Economics at the Johns Hopkins University School of Advanced International Studies. Before joining the faculty, he received his Ph.D. in Economics from Columbia University and graduated from the University of Wisconsin-Madison, where he earned his BA in Economics and Mathematics. His research combines micro-level empirical analyses and general equilibrium models to study the areas of macroeconomics and its intersection with international trade and corporate finance.
Terry S. Moon
Assistant Professor of Economics @University of British Columbia
Terry Moon is an Assistant Professor of Economics at the University of British Columbia. His main fields are public economics and corporate finance, and his research focuses on taxation, political connections, corporate acquisitions, and business investment. He received his Ph.D. in Economics from Princeton University.
Jungmin Lee
Professor of Economics @Seoul National University
Jungmin Lee is a professor of economics at Seoul National University, South Korea. His current research focuses on the Korean labor market, education, and interactions between health and economic outcomes