THE WILLIAM DAVIDSON INSTITUTE AT THE UNIVERSITY OF MICHIGAN BUSINESS SCHOOL Businessman Candidates: Special-Interest Politics in Weakly Institutionalized Environments By: Scott Gehlbach and Konstantin Sonin William Davidson Institute Working Paper Number 733 December 2004 Businessman Candidates: Special-Interest Politics in Weakly Institutionalized Environments Scott Gehlbach and Konstantin Sonin∗ Abstract We initiate examination of the political boundaries of the firm by exploring the phe- nomenon of “businessman candidates”: business owners and managers who bypass conven- tional means of political influence to run for public office themselves. We argue that in-house production of political influence will be more likely in institutional environments where can- didates find it difficult to make binding campaign promises. When campaign promises are binding, then a businessman may always pay a professional politician to run on the platform that political competition would otherwise compel the businessman to adopt. In contrast, when commitment to a campaign platform is impossible, then candidate identity matters for the poli- cies that will be adopted ex post, implying that a businessman may choose to run for office if the stakes are sufficiently large. We illustrate our arguments through discussion of guberna- torial elections in postcommunist Russia, where businessmen frequently run for public office, institutions to encourage elected officials to keep their campaign promises are weak, and com- petition for rents is intense. Keywords: Businessman candidates, elections, citizen candidates, institutions, political economy JEL Numbers: D72, P16, P26, N40 ∗Gehlbach: UW Madison,
[email protected]. Sonin: New Economic School/CEFIR and Institute for Advanced Study,
[email protected]. We thank Jim Alt, Jen Brick, Michael Carter, Ian Coxhead, John Coleman, Charles Franklin, Ted Gerber, Kathie Hendley, Nikolai Petrov, Jim Robinson, Caroline Savage, Alexandra Suslina, and Dave Weimer for many helpful comments.