The Political Impact of Winning Greenfield Investments

• In Event: Attracting and Regulating MNCs

Abstract

Politicians compete to attract global capital that serves as an important source of economic development and job growth. Do voters electorally reward politicians for winning investments in their areas? While politicians offer incentives to win job-creating investment in their localities, the electoral implications of winning investments remain under-explored. We examine this question by focusing on gubernatorial elections in the United States. As investment locations are not selected random, we try to get closer to a causal effect by comparing “winner” counties that successfully attracted a large plant with “runner-up” counties that were among the final candidates in the selection process. Our empirical analysis offers evidence that incumbent governors on average receive more votes by 2.7-2.9 percentage points for winning a large investment. The effects appear larger for attracting investments by the US-based companies than non-US companies. Using an original national survey, we find evidence that voters residing in areas that “won” a large plant were highly informed about the investment and assigned credits to the incumbent governors for attracting the plant. Our conjoint experiments further find that voters tend to prefer hosting investment by the US-based companies. Our findings illustrate how winners of economic globalization assess local economic effects of large investment and selectively reward politicians for attracting investments.

Author

• Sung Eun Kim, Korea University