Competing for global capital or local voters? The politics of business location incentives

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© 2015, Springer Science+Business Media New York. The competition for global capital has led to interjurisdictional competition between countries, states and cities as to who can offer the most attractive incentives to firms. In this study, we examine the domestic politics of this competition by focusing on incentive use in the United States from 1999 to 2012. We define incentives as the targeted tax deductions or exemptions that are used to lure businesses into a locality. Drawing on data from municipal incentive programs, we examine how electoral competition shapes the use and oversight of targeted incentives. We find evidence that cities with elected mayors provide larger incentives than non-elected city managers by taking advantage of exogeneity in the assignment of city government institutions and a database of over 2000 investment incentives from 2010 to 2012. We also find that elected mayors enjoy more lax oversight of incentive projects than their appointed counterparts. Our results have important implications for the study of interjurisdictional competition and the role of electoral institutions in shaping economic policy.





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Jensen, NM, EJ Malesky and M Walsh (2015). Competing for global capital or local voters? The politics of business location incentives. Public Choice, 164(3-4). pp. 331–356. 10.1007/s11127-015-0281-8 Retrieved from

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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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