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Department of Economics, Stockholm University Research Papers in Economics, Department of Economics, Stockholm University

No 2010:5:
Political Participation, Regional Policy and the Location of Industry

Magnus Wiberg ()

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.

Keywords: Economic Geography; Regional Policy; Voter Turnout; (follow links to similar papers)

JEL-Codes: D72; F12; R12; (follow links to similar papers)

49 pages, April 14, 2010

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This paper is forthcoming as:
Wiberg, Magnus, 'Political Participation, Regional Policy and the Location of Industry', Regional Science and Urban Economics.



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