It is found that electorally-induced policy uncertainty decreases manufacturing investment in US states. In a state with average partisan polarization, the elasticity of election-year investment to a specific measure of policy uncertainty is -0.027. When the incumbent governor is term-limited, there is greater uncertainty over the outcome, providing an instrument to demonstrate this effect is causal, not simply coincidental. Moreover, manufacturing investment does not rebound following the election. Rather, own-state uncertainty is associated with a large and significant coincident rise in neighboring states' investment. These findings suggest that policy uncertainty at the sub-national level drives investment to alternate sites.
"Fleeing a Lame Duck: Policy Uncertainty and Manufacturing Investment in US States."
American Economic Journal: Economic Policy,
Intertemporal Firm Choice: Investment, Capacity, and Financing
Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
Investment; Capital; Intangible Capital; Capacity
Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
Industry Studies: Manufacturing: General
Regional Economic Activity: Growth, Development, Environmental Issues, and Changes