We study the relationship between the presence of politicians on mobile service operators’ boards and the regulation of the mobile telecommunication sector. In countries in which mobile operators have deeper connections with local politicians, we find that rules promote competition less, even after we control for country fixed effects and a country’s level of corruption. Rules that promote competition are associated with lower concentration and lower prices. There is no evidence that procompetition rules are associated with worse quality, lower investments, less employment, or lower wages. Thus, all the evidence points to political connections being a form of rent-seeking.

We study the relative effectiveness of exit (divestment and boycott) and voice (engagement) strategies in a world where companies generate externalities and some agents care about the social impact of their decisions. We show that if the majority of investors are even slightly socially responsible, voice achieves the socially optimal outcome. In contrast, exit does not unless everybody is significantly socially responsible. If the majority of investors are purely selfish, exit is a more effective strategy, but neither strategy generally achieves the first best. We also show that exit can sometimes reduce social welfare.