Captured Development

Abstract

Scholars focus on interstate competition and intrastate economic conditions as the primary determinants of state economic development policies, including direct subsidies. New data from the Good Jobs First Subsidy Tracker illustrates large differences in subsidy spending across the states and that established firms are the disproportionate beneficiaries. In light of this new evidence, we argue that the political presence of the business sector within the state is an important determinant of state subsidy spending. A large political presence helps forward industry interests before government and has the potential to capture state governments. We find support for the cultural capture model by demonstrating that a greater number of lobbyists and campaign contributions from businesses leads to more subsidy spending, all else equal. We conclude that subsidies, and which companies receive them, are a product of both politics and economics.

Whose Neighborhood Needs? Assessing the Spatial Distribution of Federal Community Development Funds

“…Consistent with extant research, we believe that such public service distributions will tend to avoid tracts with larger shares of minority populations (Trounstine 2018; Theodos et al 2019). This hypothesis is consistent with existing urban theories on elite capture of government policymaking (Stone et al 2015; Jansa and Gray 2017), as well as resource-based views of public organizations in which cities attempt to maximize the resources they can draw from their broader environment (Deslatte and Stokan 2017). Actors’ control over resource allocation may also vary based on professionalization and institutional structure (i.e., council-manager form of government versus strong mayor).…”

The political economy of state economic development incentives: A case of rent extraction

“…Organizations are further stratified into broad sectors. Recipients of large incentives tend to be large entities such as Boeing, Ford, and Amazon (Jansa & Gray, 2017). We, therefore, expect possible increases in contributions from lawyers and professional lobbyists who might represent these firms in the political process, labor unions who may view the firms as opportunities for expansion, business advocacy organizations such as chambers of commerce and trade associations, and the construction industry that would help to build a new facility.…”

“…Most prior literature ignores the political economy aspects of incentives and, therefore, omits the public‐choice‐related social costs that should be included in any cost‐benefit analysis 9. Exceptions include Coyne and Moberg (2014), Jansa and Gray (2017), Jensen (2018), and Aobdia et al (2021), who argue that targeted‐incentive policies lead to rent‐seeking and a reallocation of entrepreneurial effort and resources from productive to unproductive uses 10. Once a state begins offering large incentives to firms, existing firms may threaten to leave to extract similar economic incentives 11.…”