firms exhibited high growth potential (see Table A4 in the Appendix and Skafianis, 2003; Roll, 2013; Loewe, 2013).

In addition, sectors with low growth potential should also have a significantly higher fraction of older firms. However, the share of young establishments in the unconnected sectors that politically connected firms entered after 1996 was actually somewhat higher than in the unconnected sectors that connected firms refrained from entering. For example, 50 percent of the establishments in unconnected sectors entered by connected firms were less than 10 years old and 28 percent were less than five years old. In the unconnected sectors that remained unconnected, 44 percent of establishments were less than 10 years old and 24 percent less than five years old.

This evidence is inconsistent with the argument that connected firms entered more mature sectors that were less likely to grow rapidly. Instead, it is more consistent of a bias in the opposite direction: connected firms may have entered into sectors with somewhat greater growth potential, and despite that these sectors experienced slower growth.

**Table 10: Average annual value added growth rates (in percentage) of treatment and control group manufacturing sectors in all other countries between 1996 and 2006**

||**All**<br>**Countries**|**High**<br>**Income**|**All**<br>**Developing**|**MENA**<br>**Countries**|**ECA**<br>**Countries**|**LAC**<br>**Countries**|
|---|---|---|---|---|---|---|
|**Unconnected sectors in 1996 subsequently**<br>**entered by politically connected firms in**|2.28|1.50|3.08|2.67|4.94|1.94|
|**Egypt**|||||||
|**Unconnected sectors in 1996 that remained**<br>**unconnected in Egypt **|1.12|0.77|1.47|0.46|2.66|-1.61|
|**Difference**|1.16**|0.73**|1.61*|2.21|2.28**|3.55|

Source: UNIDO (INSTAT4) and sample of politically connected firms in Egypt. Note: We use the broadest measure of political connections (see Table 1). The 4-digit new (previously unconnected) manufacturing sectors entered by politically connected firms after 1996 are listed in Table A4. Moreover, there are 31 unconnected sectors in 1996 that remained unconnected. “All Countries” includes all 104 countries with available data (excluding Egypt), “All Developing” 76 developing countries (excluding Egypt), “High Income” 28 high income countries, “MENA” all developing countries in the Middle East and North Africa, “ECA” all countries in Eastern Europe and Central Asia, “LAC” all countries in Latin America and the Caribbean (excluding small island states). *, ** denote that the difference in annual growth rates between the treat and control group sectors is significance at the 10%, 5% significance level (after controlling for 1-digit sector dummies).

Finally, we look at data from other countries to compare the growth record of the sectors entered by Egyptian connected firms and of sectors that they did not enter. If connected firms entered sectors with an inherently lower growth potential, we should observe those same sectors growing more slowly in other countries. In fact, in other countries where data are available, the sectors entered by connected firms in Egypt did not exhibit slower growth than the sectors that remained unconnected.

To show this, we need data on value added (or employment, investment, etc.) at the 4-digit sector level for manufacturing and service sectors between 1996 and 2006. UNIDO ( _INSTAT4)_ provides time series data on value added at the 4-digit sector level for manufacturing sectors for this 29