Pass the Bucks: Credit, Blame, and the Global Competition for Investment

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2014-09

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Abstract

© 2013 International Studies Association. Both countries and subnational governments commonly engage in competition for mobile capital, offering generous incentives to attract investment. Existing economics research has suggested that these tax incentives have a limited ability to affect investment patterns and are often excessively costly when measured against the amount of investment and jobs created. In this paper, we argue instead that the "competition" for capital can be politically beneficial to incumbent politicians. Building off work on electoral pandering, we argue that incentives allow politicians to take credit for firms' investment decisions. We test the empirical implications of this theory using a nationwide Internet survey, which employs a randomized experiment to test how voters evaluate the performance of incumbent US governors. Our findings illustrate a critical political benefit of offering such incentives. Politicians can use these incentives to take credit for investment flowing into their districts and to minimize the political fallout when investors choose to locate elsewhere.

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10.1111/isqu.12106

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Jensen, NM, E Malesky, M Medina and U Ozdemir (2014). Pass the Bucks: Credit, Blame, and the Global Competition for Investment. International Studies Quarterly, 58(3). pp. 433–447. 10.1111/isqu.12106 Retrieved from https://hdl.handle.net/10161/17742.

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Scholars@Duke

Malesky

Edmund Malesky

Professor of Political Science

Malesky is a specialist on Southeast Asia, particularly Vietnam. Currently, Malesky's research agenda is very much at the intersection of Comparative and International Political Economy, falling into three major categories: 1) Authoritarian political institutions and their consequences; 2) The political influence of foreign direct investment and multinational corporations; and 3) Political institutions, private business development, and formalization.


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