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Political Participation, Regional Policy and the Location of Industry

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  • Wiberg, Magnus

    ()
    (Ministry of finance)

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    Abstract

    This paper analyzes the location of manufacturing activities when regional policy is determined by each region’s relative propensity to vote. Once voting over government transfers to regions is included in an economic geography framework with size asymmetries, the standard prediction that the larger region becomes the core when trade barriers are reduced no longer holds. The establishment of manufacturing production in the economically smaller region is increasing in the level of regional integration. As trade is increasingly liberalized, the economy eventually features a reversed core-periphery equilibrium where all firms reside in the South. It is further shown that the relative political participation rate increases in the factor scarce region as trade is liberalized. Empirical evidence shows that the model is consistent with qualitative features of the data.

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    File URL: http://www2.ne.su.se/paper/wp10_05.pdf
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    Bibliographic Info

    Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2010:5.

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    Length: 49 pages
    Date of creation: 14 Apr 2010
    Date of revision:
    Publication status: Forthcoming as Wiberg, Magnus, 'Political Participation, Regional Policy and the Location of Industry' in Regional Science and Urban Economics, 2011, pages 11.
    Handle: RePEc:hhs:sunrpe:2010_0005

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    Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
    Phone: +46 8 16 20 00
    Fax: +46 8 16 14 25
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    Web page: http://www.ne.su.se/
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    Related research

    Keywords: Economic Geography; Regional Policy; Voter Turnout;

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    1. Head, Charles Keith & Mayer, Thierry, 2003. "The Empirics of Agglomeration and Trade," CEPR Discussion Papers 3985, C.E.P.R. Discussion Papers.
    2. Maurice Obstfeld & Kenneth Rogoff, 2001. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," International Trade 0012003, EconWPA.
    3. Ellison, G. & Glaeser, E.L., 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Working papers 94-27, Massachusetts Institute of Technology (MIT), Department of Economics.
    4. Olivier Cadot & Lars-Hendrik Röller & Andreas Stephan, 2004. "Contribution to Productivity or Pork Barrel?: The Two Faces of Infrastructure Investment," Discussion Papers of DIW Berlin 458, DIW Berlin, German Institute for Economic Research.
    5. Gordon H. Hanson, 1998. "Market Potential, Increasing Returns, and Geographic Concentration," NBER Working Papers 6429, National Bureau of Economic Research, Inc.
    6. Timothy Feddersen & Alvaro Sandroni, 2006. "A Theory of Participation in Elections," American Economic Review, American Economic Association, vol. 96(4), pages 1271-1282, September.
    7. Homburg, Stefan, 1997. "Ursachen und Wirkungen eines zwischenstaatlichen Finanzausgleichs," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 61-95.
    8. Robert-Nicoud, Frederic & Sbergami, Federica, 2004. "Home-market vs. vote-market effect: Location equilibrium in a probabilistic voting model," European Economic Review, Elsevier, vol. 48(1), pages 155-179, February.
    9. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February.
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