NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Towards a Political Theory of the Firm

Luigi Zingales

NBER Working Paper No. 23593
Issued in July 2017
NBER Program(s):Corporate Finance

Neoclassical theory assumes that firms have no power of fiat any different from ordinary market contracting, thus a fortiori no power to influence the rules of the game. In the real world, firms have such power. I argue that the more firms have market power, the more they have both the ability and the need to gain political power. Thus, market concentration can easily lead to a “Medici vicious circle,” where money is used to get political power and political power is used to make money.

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Document Object Identifier (DOI): 10.3386/w23593

Published: Luigi Zingales, 2017. "Towards a Political Theory of the Firm," Journal of Economic Perspectives, vol 31(3), pages 113-130. citation courtesy of

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