Date Published:

Abstract:

This paper studies whether crony governance affects the logic behind governments’ targeting of violence, and how the deployment of violence allows politically connected firms to benefit from crony governance.  We address these issues in the context of the Argentine military junta that took power on March 24, 1976.  Specifically, we examine the logic driving the choice of firm level union representatives who were subjected to violence following the coup.  Using an original dataset assembled and digitized by us, we find that political, business and social connections to the regime are associated with an increase of 2 to 3 times in the number of firm level union representatives arrested and/or disappeared.  This is the case even after controlling for a battery of firms’ characteristics that capture alternative explanations for the targeting of violence.  The effect is particularly pronounced in privately owned (as opposed to state-owned) firms, suggesting that the correlation is driven by cronyism for financial gain rather than ideology or information transmission.  We also show that connected firms benefited from violence against union representatives by subsequently having less strikes and a higher market valuation.  Our findings highlight the pervasiveness of ties to the government, even in cases where one of the main stated goals of the regime is to curb cronyism.