Three Essays on the Political Economy of Business-Government Relations: The Case of Corporate Headquarters Relocation.
(Job market paper)
Why do national and subnational governments offer lucrative incentives to attract and retain corporate headquarters (HQ), whose direct economic effects are often negligible? An answer may lie in the electoral effects of HQ relocation: voters respond to HQ relocation since it signals potential changes in economic welfare. However, voters’ evaluations depend on whether HQ moves in or out of their respective localities: When HQ relocate in, citizens tend to vote for the incumbent party in gubernatorial elections, expecting similar positive events to continue. When HQ relocate out, voters increase support for the Republican Party in an effort to lower the chances of recurrence. This is because of the pervasive belief that the Democratic Party tends to pursue the main policy drivers of HQ outflow—high corporate tax rates and less-friendly business environments. Using an original dataset of cross-state HQ relocation cases covered in news media from 1995 to 2015, I find robust evidence for the theory: HQ outflow results in greater vote share to Republican candidates whereas HQ inflow increases support for the incumbent party in gubernatorial elections. The findings have implications for the political economy of business-government relationships, the politics of investment, and our understanding of economic voting as well as electoral accountability.
"Keeping Firms in My State: Partisan Incentives to Deter Headquarters Relocation."
Building upon the finding in the first essay that Democratic governors are more sensitive to HQ outflow, I hy- pothesize that Democratic governors are more likely to offer financial benefits to firms in order to deter relocation. To test the hypothesis, this study exploits variations associated with close elections in a regression discontinuity design on gubernatorial elections, mitigating the threat of endogeneity. Using a database of financial reports of public firms from 1980 to 2014, I find that mobile firms such as multinational corporations and firms with low fixed assets are more likely to pay lower effective corporate tax rates under Democratic governors than under Republican governors, counter to conventional wisdom.
"Credit and Blame Attributions on Corporate HQ Relocation: Evidence From Survey Experiments."
To examine the mechanism behind the electoral effects of corporate HQ relocation, I conduct a randomized survey experiment on a national sample of US respondents. This project investigates whether and how voters update their beliefs about economic conditions and the incumbent’s ability to manage the local economy when HQ relocation occurs. In addressing this question, I account for the possibility that individual-level factors influence subjective evaluations of economic performance. The survey experiment provides causal evidence that voters’ perceptions of changes in economic welfare depend on whether HQ inflow or outflow happens. Furthermore, the findings reveal that respondents’ partisanship and economic attributes, such as their skill level and occupational status, generate heterogeneous electoral effects.