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The comparative political economy of the location of industry

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  • Magnus Wiberg

Abstract

This paper studies location decisions of firms in an economic geography model with endogenous regional policy. Policy is determined by probabilistic voting under proportional and majoritarian elections. Different electoral competition give rise to different location incentives. Under plausible assumptions, the smaller region has a higher fraction of ideologically independent swing voters than the larger region. Majoritarian voting, by focusing electoral competition into swing districts containing the most policy‐responsive voters, therefore allocates more subsidies to firms in the smaller region. Compared to proportional voting, this leads to more firms in the region with fewer consumers. Proportional voting thus welfare‐dominates majoritarian election. L'économie politique comparée de la localisation industrielle. Ce texte étudie les décisions de localisation des firmes dans un modèle de géographie économique où la politique régionale est endogène. La politique est déterminée par le vote probabiliste dans des régimes électoraux à la proportionnelle ou majoritaires. Les différents régimes électoraux créent des incitatifs de localisation différents. Sur la base de postulats plausibles, la plus petite région a une fraction plus grande d'électeurs idéologiquement indépendants et volatils que la région la plus grande. Les régimes électoraux majoritaires, en focalisant la concurrence sur les districts volatils contenant le plus d'électeurs susceptibles d'être sensibles à l'orientation de la politique, tendent à allouer plus de subventions aux firmes de la plus petite région. Par opposition aux régimes électoraux à la proportionnelle, cela entraîne davantage de firmes à se localiser dans la région où il y a le moins de consommateurs. Le régime électoral à la proportionnelle domine donc, au plan du bien‐être, le régime électoral majoritaire.

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  • Magnus Wiberg, 2015. "The comparative political economy of the location of industry," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(1), pages 134-154, February.
    • Handle: RePEc:wly:canjec:v:48:y:2015:i:1:p:134-154
    DOI: 10.1111/caje.12128
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