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Political Power-Sharing, Firm Entry, and Economic Growth: Evidence from Multiple Elected Representatives
Harsha Dutta, Pulak Ghosh, Arkodipta Sarkar, Nishant Vats
https://arxiv.org/abs/2608.08934 https://arxiv.org/pdf/2608.08934 https://arxiv.org/html/2608.08934
arXiv:2608.08934v1 Announce Type: new
Abstract: We examine the effect of political power-sharing on local economic activity. This effect depends on the relative importance of the risks associated with unchecked power and the potential efficiency gains or losses arising from checks and balances. Our research design exploits a geographic discontinuity design due to the haphazard overlap of electoral and administrative boundaries that generates quasi-random variation in the number of politicians governing adjacent regions. We supplement this design using an episode of electoral delimitation that allows us to exploit within-region variation in the number of politicians. We find increasing the number of politicians governing an area can lead to new firm creation, lower unemployment, and greater real economic activity. Our results suggest that non-aligned multiple politicians enhance state efficiency by imposing checks and balances on each other, leading to lower regulatory obstacles, less cronyism, and improved provision of public infrastructure, creating an economically favorable environment for firm creation.
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