Doctoral Dissertation Research in Political Science: The Political Economy of Decline

Duke University, Durham NC

Investigators

Abstract

The process of deindustrialization has swept large swaths of America's manufacturing heartland and many other advanced economies. Historically, industrial production clustered by location, creating one-industry cities and regions. In many of these places, manufacturing employment has dropped significantly as industrial production has moved elsewhere and economies have shifted toward the service sector. This has had a major impact on many cities around the world, which face high unemployment and poverty rates. Declining firms and local politicians in such places clamor for government support. Yet that support is easier to find in some settings than others. While the current literature on subsidies focuses almost exclusively on national-level price distortions, this research looks at the causes and effects of subsidies and other forms of government aid at the city level, where failing industries can have their biggest political and economic impact. This project will bridge the gap between research on the provision and effects of government protection -- both why some firms receive support while others do not and the impact of such protection on the incentives of firms to innovate. By doing a comparative study on the provision and effects of government support, the research will show how governmental involvement works as a brake or an accelerator for economic decline in regions that house concentrated industries. These findings have important implications in a world where deindustrialization is rife and old industrial areas face the constant challenge of reinventing themselves. The research has three parts. First, the researchers will examine the relationship between subsidies and geographically concentrated industries using a quantitative analysis of firm-level data across countries. The researchers will supplement this quantitative empirical work with more nuanced cross-national case studies. The first will be a comparative study of the auto industry in three different electoral systems: the US, the UK and Germany. The auto industry's relatively concentrated production in these three countries allows the researchers to hold economic concentration constant while varying politicians' responsiveness to the industry. The second case study will utilize the change in New Zealand's electoral system. By switching from an electoral system where politicians care about geographic interests to a system where politicians care about national constituencies, the researcher can examine how different electoral systems affect firm and politician behavior in a national context where the geography of industrial production has not changed. Finally, the last part of my research links the provision of subsidies to their effects on industries and local economies. The researchers expect firms that receive subsidies to decrease innovation at the expense of rent-seeking. They will combine an examination of the link between subsidies and levels of innovation using firm-level data from around the world with a more detailed use of micro-data within the United States. The researchers expect this research to have important implication for our understanding of why government support is allocated to some firms and not others. Equally important, the researchers expect it to provide important insight into why some post-industrial cities and regions are able to make the transition to new, knowledge-based economies fairly easily, while others remain stuck in protracted economic decline.