Campaign Finance and State Capture

This chapter uses a novel database on contractual arrangements between politicians, political brokers, and businessmen in Benin to investigate the way the nature of these arrangements depends on the level of political competition. We find that firms provide financial support to local and national politicians in exchange for policy concessions, direct budget support of firms, ‘favourable’ procurement auctions (bid-rigging), and various forms of state capture. In addition, while bid-rigging features constantly in politician–firm contracts, increased electoral uncertainty is associated with less demand for policy concessions and stronger preference for direct forms of state capture, that is, the appointment of firms’ agents or cronies to key government positions. In other words, electoral uncertainty could simultaneously contribute to democratic consolidation through political turnover, and to worse forms of corruption through state capture by business elites.