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Political participation, regional policy and the location of industry


  • Wiberg, Magnus


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.

Suggested Citation

  • Wiberg, Magnus, 2011. "Political participation, regional policy and the location of industry," Regional Science and Urban Economics, Elsevier, vol. 41(5), pages 465-475, September.
  • Handle: RePEc:eee:regeco:v:41:y:2011:i:5:p:465-475

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    References listed on IDEAS

    1. 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.
    2. Head, Keith & Mayer, Thierry, 2004. "The empirics of agglomeration and trade," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 59, pages 2609-2669 Elsevier.
    3. 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.
    4. Vincent Dupont & Philippe Martin, 2006. "Subsidies to poor regions and inequalities: some unpleasant arithmetic," Journal of Economic Geography, Oxford University Press, vol. 6(2), pages 223-240, April.
    5. repec:cup:apsrev:v:86:y:1992:i:03:p:658-674_09 is not listed on IDEAS
    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. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
    8. Ellison, Glenn & Glaeser, Edward L, 1997. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 889-927, October.
    9. David Strömberg, 2004. "Radio's Impact on Public Spending," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 189-221.
    10. Merrifield, John, 1993. "The Institutional and Political Factors That Influence Voter Turnout," Public Choice, Springer, vol. 77(3), pages 657-667, November.
    11. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February.
    12. Homburg, Stefan, 1997. "Ursachen und Wirkungen eines zwischenstaatlichen Finanzausgleichs," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 61-95.
    13. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
    14. repec:cup:apsrev:v:104:y:2010:i:02:p:268-288_00 is not listed on IDEAS
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    Cited by:

    1. Magnus Wiberg, 2015. "The comparative political economy of the location of industry," Canadian Journal of Economics, Canadian Economics Association, vol. 48(1), pages 134-154, February.
    2. Hayato Kato, 2017. "Lobbying and Tax Competition in an Oligopolistic Industry: A Reverse Home Market Effect," Keio-IES Discussion Paper Series 2017-028, Institute for Economics Studies, Keio University.


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