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Political participation, regional policy and the location of industry

  • Wiberg, Magnus
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    This paper analyzes the location of manufacturing activities when regional policy is determined by each region's relative propensity to vote. The level of subsidies distributed to a region and the location of manufacturing activities are increasing in the region's relative political participation rate. The standard prediction in the economic geography literature, 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 features a reversed core-periphery equilibrium. Empirical evidence shows that the model is consistent with qualitative features of the data, and the results are robust to an instrumental variable strategy that accounts for the potential endogeneity of voter turnout.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0166046211000330
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    Article provided by Elsevier in its journal Regional Science and Urban Economics.

    Volume (Year): 41 (2011)
    Issue (Month): 5 (September)
    Pages: 465-475

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    Handle: RePEc:eee:regeco:v:41:y:2011:i:5:p:465-475
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    1. Knack, Steve, 1994. " Does Rain Help the Republicans? Theory and Evidence on Turnout and the Vote," Public Choice, Springer, vol. 79(1-2), pages 187-209, April.
    2. Head, Keith & Mayer, Thierry, 2003. "The Empirics of Agglomeration and Trade," CEPR Discussion Papers 3985, C.E.P.R. Discussion Papers.
    3. Hanson, G.H., 1999. "`Market Potential, Increasing Returns, and Geographic Concentration," Working Papers 439, Research Seminar in International Economics, University of Michigan.
    4. Dupont, Vincent & Martin, Philippe, 2003. "Subsidies to Poor Regions and Inequalities: Some Unpleasant Arithmetic," CEPR Discussion Papers 4107, C.E.P.R. Discussion Papers.
    5. 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.
    6. 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.
    7. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
    8. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February.
    9. Merrifield, John, 1993. " The Institutional and Political Factors That Influence Voter Turnout," Public Choice, Springer, vol. 77(3), pages 657-67, November.
    10. Timothy Feddersen & Alvaro Sandroni, 2006. "A Theory of Participation in Elections," American Economic Review, American Economic Association, vol. 96(4), pages 1271-1282, September.
    11. David Strömberg, 2004. "Radio's Impact on Public Spending," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 189-221, February.
    12. Homburg, Stefan, 1997. "Ursachen und Wirkungen eines zwischenstaatlichen Finanzausgleichs," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 61-95.
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