Pass the Bucks: Investment Incentives as Political Credit-Claiming Devices Evidence from a Survey Experiment

Jensen, Nathan M.; Malesky, Edmund J.; Medina, Mariana; Ozdemir, Ugur

doi:10.2139/ssrn.1669771

Cited by 9 publications

(10 citation statements)

References 41 publications

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“…In these situations, the politician has an incentive to ''pander,'' choosing the policy that is popular even if it is not in the voters' direct interest (Maskin and Tirole 2004). 5 Following Harrington (1993) and Jensen et al (2014), we argue that voters have an intrinsic interest in economic outcomes (e.g., attracting investment) but have inadequately formed beliefs about the effectiveness of policies (e.g., incentives) in achieving these outcomes. In addition, consistent with Canes-Wrone et al (2001), politicians may implement a policy that they suspect is inefficient economically to signal their alignment with the voters' purported interests.…”

Section: Theorymentioning

confidence: 96%

“…Jensen et al (2014) argue that one explanation is the electoral benefit of using incentives for political pandering. More specifically, by building on theories of electoral pandering and using an original survey experiment of US voters' evaluations of governors (which helped limit endogeneity), they find that incentives provide substantial electoral benefits.…”

Section: The Economics Of Incentivesmentioning

confidence: 99%

“…Even more tellingly, in 2011 Gallup asked respondents what Obama could do to create jobs; 85 % favored ''Providing tax cuts for small businesses, including incentives to hire workers,'' and 73 % favored ''Giving tax breaks to companies to hire people who have been unemployed for six months'' (Newport 2011). On the question of attracting investment, 70 % of US respondents believed that tax incentives were a very important determinant of firm location choice (Ansolabehere 2010). has noted that politicians are not punished electorally for using these expensive policies and are even awarded additional credit for them (Jensen et al 2014).…”

Section: Theorymentioning

confidence: 99%

“…Politicians that can marginally increase the probability of attracting investment view the extensive use of taxpayer incentives as an enticing strategy. Although political leaders in mayor-council and council-manager systems both benefit from attracting new investment, previous research shows that announcements of an incentive program's success in enticing new firms to locate in a jurisdiction (or an existing firm to expand) generate direct electoral benefits and essentially no political costs (Jensen et al 2014). These electoral benefits provide politicians in mayor-council systems with more reasons to offer generous incentives.…”

Section: Theorymentioning

confidence: 99%

See 3 more Smart Citations

Competing for global capital or local voters? The politics of business location incentives

Jensen

Malesky

Walsh³

2015

Public Choice

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The competition for global capital has led to interjurisdictional competition between countries, states and cities as to who can offer the most attractive incentives to firms. In this study, we examine the domestic politics of this competition by focusing on incentive use in the United States from 1999 to 2012. We define incentives as the targeted tax deductions or exemptions that are used to lure businesses into a locality. Drawing on data from municipal incentive programs, we examine how electoral competition shapes the use and oversight of targeted incentives. We find evidence that cities with elected mayors provide larger incentives than non-elected city managers by taking advantage of exogeneity in the assignment of city government institutions and a database of over 2000 investment incentives from 2010 to 2012. We also find that elected mayors enjoy more lax oversight of incentive projects than their appointed counterparts. Our results have important implications for the study of interjurisdictional competition and the role of electoral institutions in shaping economic policy.

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Section: Theorymentioning

confidence: 96%

Section: The Economics Of Incentivesmentioning

confidence: 99%

Section: Theorymentioning

confidence: 99%

Section: Theorymentioning

confidence: 99%

See 2 more Smart Citations

Competing for global capital or local voters? The politics of business location incentives

Jensen

Malesky

Walsh³

2015

Public Choice

Self Cite

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“… There are a few laboratory experiments investigating special interests from a different perspective: e.g., Kirchsteiger and Prat () study a game with one policymaker and multiple competing special interests, and Potters and van Winden () study a signaling game between a policymaker and a lobbyist. See also the survey experiment of Jensen et al () where policymakers compete via tax incentives for local investments of firms under the shadow of elections. …”

mentioning

confidence: 99%

Political Quid Pro Quo Agreements: An Experimental Study

Großer

Reuben

Tymula

2013

American J Political Sci

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We experimentally study the common wisdom that money buys political influence. In the game, one special interest (i.e., a corporate firm) has the opportunity to influence redistributive tax policies in her favor by transferring money to two competing candidates. The success of the investment depends on whether or not the candidates are willing and able to collude on low-tax policies that do not harm their relative chances in the elections. In the experiment, successful political influence never materializes when the firm and candidates interact just once. By contrast, it yields substantially lower redistribution in about 40% of societies with finitely repeated encounters. However, investments are not always profitable, and profit sharing between the firm and candidates depends on prominent equity norms. Our experimental results shed new light on the complex process of buying political influence in everyday politics and help explain why only relatively few firms do actually attempt to influence policymaking.

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Regional competition, business politicians, and subnational fiscal policy

Baccini¹,

Li²,

Mirkina³

et al. 2018

Bus. Polit.

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What explains subnational policy choices over tax cut after decentralization? We test two different explanations in the context of the 2002 tax reform in Russia. A popular strand of literature suggests that decentralization induces more regional competition over investment, motivating subnational tax cuts. A second body of literature suggests that personal business interests of regional governors can account for their different policy choices. Governors with personal business ties refrain from tax cuts because they increase market competition. We find no support for the regional competition hypothesis, but strong statistical evidence for the business connection hypothesis. Our findings have important implications for research on fiscal decentralization and on the connections between business interests of leaders and their policy choices.

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Pass the Bucks: Investment Incentives as Political Credit-Claiming Devices Evidence from a Survey Experiment

Cited by 9 publications

References 41 publications

Competing for global capital or local voters? The politics of business location incentives

Competing for global capital or local voters? The politics of business location incentives

Political Quid Pro Quo Agreements: An Experimental Study

Regional competition, business politicians, and subnational fiscal policy

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