Katalin Döbrönte (p)

Alexandra Tsvetkova

see extended abstract

Davide Luca (p)

Katalin Döbrönte

Exploiting novel GDP data over the period 2004-2014, I explore whether the government of Turkey ‘picked’ local economic winners depending on the levels of provincial electoral support to the incumbent party. New instrumental variable estimates suggest that votes for the Justice and Development Party (AKP) have led to up to two percentage points of faster per-capita yearly GDP growth rate. The effect is highest in provinces where the electoral race is closest. Such reduced-form link is driven, at least in part, by the government’s strategic territorial redistribution of developmental goods, namely public investment and investment subsidies to firms. Results contribute to the debate on how politics can have significant impacts on the real economy, particularly in polities characterized by deep political polarization.

Mark Partridge , Alexandra Tsvetkova (p)

Davide Luca

This paper seeks to explore the effects of regional industrial cohesion – the degree to which local industrial structure is well-aligned allowing industries benefit from proximate location – on economic performance of and business dynamics within US counties. Unlike much of the previous research, which focused on metropolitan regions only or on a specific co-location mechanism, we consider all continental US and, following recent developments in the evolutionary economics, calculate a measure of cohesion based on revealed comparative advantage and all industries except for agriculture and government, which has the benefit of capturing co-location patterns that emerged for any reason including increasingly important interdependencies between manufacturing and producer services. One of our paper contributions is to extend this industry-based measure into a region-based (county) metrics accounting for the size of each industry in a county. The results of first-difference seemingly unrelated regressions estimation suggest that regional industrial cohesion generally enhances local economic performance measured by employment and income growth in both nonmetro and metro regions but it explains more outcomes in the nonmetro sample. Having established a positive relationship, we look at one of its possible mechanisms, the impact of industrial cohesion on business dynamics. Both single-unit and multi-unit firms benefit from cohesive economic environment where birth rates and expansions intensify and exits and contractions decrease, although there are certain variations across business dynamics measures, geographies and firm types.