Private Sector Policy Making: Business Background and Politicians’ Behavior in Office

Candidates often tout their private sector experience when running for public office. But do businessperson politicians actually govern differently? This paper argues that given their preferences and managerial expertise, businesspeople in office adopt policies favorable to the business community and improve government efficiency. To test these claims, I collect data on over 33,000 Russian mayors and legislators and investigate policy outcomes using detailed municipal budgets and over a million procurement contracts. Using a regression discontinuity design, I find that businessperson politicians increase expenditures on roads and transport, while leaving health and education spending untouched. Prioritizing economic over social infrastructure brings immediate benefits to firms, while holding back long-term accumulation of human capital. Businesspeople also do not reduce budget deficits, but rather adopt less competitive methods for selecting contractors, particularly in corruption-ripe construction. In all, businessperson politicians do more to make government run for business, rather than like a business.