Policy Research

Electoral Institutions and Electoral Cycles in Economic Development: A Field Experiment of over 3,000 municipalities

Nathan Jensen, Michael Findley, Daniel Nielson

Summary

The article asserts the claim that economic development incentives are not only ineffective and inefficient, but that they are used as political tools to claim credit or avoid blame for economic growth or decline, respectively. Municipalities with direct elections for an executive head were more willing to offer interested firms incentives if they chose to locate their business in their locality. This takes a stronger hold in direct election cities during political business cycles – loose fiscal or monetary policy in the periods prior to elections.

Read Now

Policy Implications

Polices, whether genuine in their approach to stimulating economic growth or not, are less likely to produce effective and efficient methods for economic development. As economic development performance is one of the most important factors for an incumbent’s success, these policy implications of economic development incentives are more likely to influence incumbent candidates to use these methods for political gain than to incite actual developmental change and progress.