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Political Participation, Regional Policy and the Location of Industry

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  • Wiberg, Magnus

    () (Ministry of finance)

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.

Suggested Citation

  • Wiberg, Magnus, 2010. "Political Participation, Regional Policy and the Location of Industry," Research Papers in Economics 2010:5, Stockholm University, Department of Economics.
  • Handle: RePEc:hhs:sunrpe:2010_0005
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    File URL: http://www2.ne.su.se/paper/wp10_05.pdf
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    References listed on IDEAS

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    3. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, pages 1-24.
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    6. 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.
    7. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, pages 79-102.
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    9. Cadot, Olivier & Roller, Lars-Hendrik & Stephan, Andreas, 2006. "Contribution to productivity or pork barrel? The two faces of infrastructure investment," Journal of Public Economics, Elsevier, pages 1133-1153.
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    11. 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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    More about this item

    Keywords

    Economic Geography; Regional Policy; Voter Turnout;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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