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Three Essays on the Political Economy of Business Mobility: Electoral and Policy Implications of Business Location Decisions Joonseok Yang Submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in the Graduate School of Arts and Sciences COLUMBIA UNIVERSITY 2019 c 2019 Joonseok Yang All Rights Reserved ABSTRACT Three Essays on the Political Economy of Business Mobility: Electoral and Policy Implications of Business Location Decisions Joonseok Yang The key underlying question of this dissertation is whether and how business actors are able to use their heightened mobility to affect electoral outcomes and constrain the policy choices of elected officials. Focusing on cases of interstate corporate head- quarters (HQ) relocation and its effects on gubernatorial elections, this dissertation investigates the electoral effects of HQ relocation and its implications for policy. The first chapter examines electoral effects of interstate HQ relocation. My analysis shows that HQ relocation generates electoral responses but in an asymmetrical manner be- tween HQ inflow and HQ outflow: 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. Building upon the findings in the first chapter, the second chapter investigates whether the asymmetric responses of voters to HQ relocation gives rise to different practices in offering lucra- tive tax incentives depending on the partisanship of the elected officials. The analysis provides evidence that mobile firms such as multinational corporations and firms op- erating in multiple states, pay lower effective corporate tax rates under Democratic governors than Republican governors. Lastly, the third chapter investigates micro- foundtional support for partisan blame attributions in the wake of HQ relocation using a survey experiment. I find that the effects of party label only prevail in the aftermath of an HQ outflow since voters believe that Democrat politicians tend to support high corporate tax rates and less-friendly business environments, which, these voters believe, push corporate HQ out of their states. The findings of my disserta- tion have implications for the political economy of business-government relationships, broad debates on the effects of economic globalization on policy levers of governments, and our understanding of electoral accountability. Table of Contents List of Figures ii List of Tables iv Introduction 1 1 Nonpartisan Reward and Partisan Punishment: Electoral Effects of Corporate Headquarters Relocation 8 2 Partisan Responses to the Mobility of Firms: Political Incentives to Retain Firms and Tax Treatment 61 3 The Asymmetric Effects of Party Labels: The Roles of Partisan Cues and Policy Information in the Attribution Process 101 Conclusion 129 Bibliography 132 Appendix A 148 Appendix B 175 Appendix C 195 i List of Figures 1.1 Graphical Representation of Theoretical Logic . 19 1.2 Maps of Counties that Experienced HQ Relocation . 31 1.3 HQ Relocation Cases by States, 1995-2015 . 32 1.4 Proportion of HQ relocation to High/Same/Low States . 33 1.5 Histograms - HQ Inflow and Outflow . 35 1.6 Coefficient Plots with 95% Confidence Level . 43 1.7 Coefficient Plots with 95% Confidence Level: Effects Before the Elec- tionYears)................................. 44 1.8 Graphical Representation of Average Controlled Direct Effects (ACDE) 56 2.1 Graphical Presentation of RD Estimation Results for MNC and Do- mesticFirms ............................... 91 2.2 Graphical Presentation of RD Estimation Results for the Low-, Mid- (b), and High-Mobility Groups . 93 2.3 Covariate Balance Checks for MNC and Domestic Firms . 95 2.4 Covariate Balance Checks for Low-, Mid-, and High-Mobility Group . 96 2.5 Panel Matching Estimation Results for MNC and Domestic Firms . 96 2.6 Panel Matching Estimation Results for Low-, Mid-, and High-Mobility Group ................................... 97 3.1 Opinions about Economic Implications of HQ Relocation . 117 3.2 Opinions about Drivers of HQ Relocation. 118 ii 3.3 Perception about Political Party's Competence . 119 3.4 Coefficient Plots: Partisan Differences in the Effects of HQ Relocation 122 3.5 Heterogeneous Effects by Party Identification . 124 3.6 Heterogeneous Effects by Education . 125 iii List of Tables 1.1 Falsification Test for Parallel Trend Assumption . 38 1.2 Main Estimation Results . 40 1.3 Estimation Results using the DMA . 42 1.4 Estimation Results using Survey Data . 50 1.5 Effects of the President's Partisanship . 53 1.6 Effects of HQ Relocation on Presidential Elections . 54 2.1 Two Way Frequencies Table for Indicators for MNC and the Number of States where the Firm Operates . 80 2.2 Fixed Effects Estimation Results . 88 2.3 RD Estimation Results: MNC and Domestic Firms . 90 2.4 RD Estimation Results: Low-, Mid-, and High-Mobility Group . 94 3.1 Interpretation of Main Model Parameters . 115 3.2 OLS Estimation Results: Partisan Differences in the Effects of HQ Relocation................................. 121 iv Acknowledgments When I first settled down in Morningside Heights in 2010, I did not imagine myself pursuing an academic career. After spending about two years as a legislative staff at the National Assembly of South Korea, I just wanted to study something interesting and started a new chapter of my life as a Master's student at the School of International and Public Affairs. Along the way, however, my passion for academic research and intellectual curiosity has led me to pursue a Ph.D. Over the last nine years, my journey to obtain a Ph.D. was not always a bed of roses: a series of unexpected difficulties, worries, and self-doubt sometimes plagued me, but with the sincere support and guidance that I received from many people, I have been able to complete this dissertation. First of all, I am deeply indebted to my adviser Robert Erikson for his fundamen- tal role in my Ph.D. studies. Bob provided me with contribute valuable feedback, advice, and encouragement through our weekly Wednesday meetings throughout the years. His patience, motivation, and immense knowledge helped me in all my re- search and during the writing of this dissertation. He has been my primary resource for answering my science questions and has boosted my confidence by supporting my various projects. In addition to his academic support, I greatly value the close per- sonal rapport that Bob and I have forged over the years, especially through watching baseball games at Yankee Stadium or Citi Field and touring Chinese restaurants for spicy food. I simply cannot imagine a better adviser. I would like to express my sincere gratitude to other members of my commit- v tee. Justin Phillips has taught me a great deal about utilizing creativity in my re- search. His insightful comments and hard questions have motivated me to broaden my research from various perspectives. I also have to thank Tonya Putnam for her contribution of time, ideas, and warm encouragement to make my Ph.D. experience productive. In particular, she helped me outline an ambitious timetable for finishing that carried me through my time at Columbia. I am also deeply grateful to Allison Carnegie, who has been a strong and supportive adviser to me. I was very fortu- nate to work as her research assistant and a co-author, from which I learned more about the process of research, from building up models to testing hypotheses. I also owe a great debt of gratitude to Pablo Pinto. I still vividly remember the moment when I took his seminar class of POLS G8804 International Political Economy in Fall 2011 that sparked my interest in political economy. His sincere support and advice have always helped me excel in my research. Although he is not a member of my dissertation committee, Johannes Urpelainen has taught me how to research. I feel extremely privileged to have been his co-author on numerous projects. The most valuable lesson, though, has been seeing how creative ideas and interesting research questions can be generated. I hope that I can someday be as productive, passionate and energetic a scholar as Johannes. I owe a great debt of gratitude to other advisers, mentors, and teachers|Nikhar Gaikwad, Donald Green, Jeff Lax, Sang Yup Lee, In Song Kim, Yotam Margalit, John Marshall, Ki Ho Park, and Hye Young You|for their immensely helpful comments and suggestions. Their enthusiasm for their research has always been contagious and motivational for me, particularly during tough times in my Ph.D. studies. They all have also played critical roles in formulating my research questions and polishing my research. Without their continuous guidance, this dissertation would not have been completed. I will also forever be thankful to my amazing colleagues at Columbia for their vi support throughout my time in graduate school. They have been a source of friend- ship as well as good advice and collaboration. Among others,Abhit Bhandari, Brian Blankenship, Andrew Cheon, Jae Hyun Chung, Andy Guess, Kolby Hanson, Trish Kirkland, Jacob Kopas, Byung Kyu Lee, Giancarlo Visconti, Erin York, and Adam Zelizer have provided me invaluable personal and professional assistance and guid- ance. I would especially like to thank Ashton Hyun Seung Cho, Sung Eun Kim, and Tara Slough, who have always been willing to engage ideas and to invest their energy to help me. Their brilliant opinions, warmest cheer, and willingness to share both have been great assets to my research and life at Columbia. My association with them has been among the most pleasurable and enjoyable experiences of my graduate career. Nobody has been more important to me in my pursuit of Ph.D.