Political Power-Sharing, Firm Entry, and Economic Growth: Evidence from Multiple Elected Representatives

2026-08-09

AI Summary

This study investigates whether shared local political power fosters economic growth through institutional checks and balances. Exploiting geographic discontinuities between electoral and administrative boundaries, together with redistricting events that exogenously alter the number of representatives per jurisdiction, the authors construct a dual quasi-natural experiment combining a regression discontinuity design (RDD) with variation induced by redistricting. The findings reveal that multi-representative governance—when politicians are not politically aligned—significantly enhances government efficiency, reduces regulatory barriers and clientelism, and consequently stimulates new firm entry, lowers unemployment, and increases real economic activity. These results provide novel causal evidence supporting the economic benefits of decentralized political accountability and intra-jurisdictional power sharing.

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.

Problem

• political power-sharing
• firm entry
• economic growth
• checks and balances
• local economic activity

Innovation

• political power-sharing
• geographic discontinuity design
• quasi-random variation
• checks and balances
• firm entry