Fooling All the People All the Time? The Domestic Political Effects of Foreign-Funded Development Projects Public
Stefano Jud (Fall 2023)
Abstract
This dissertation consists of three papers that investigate why foreign-funded development projects (FFDPs), such as foreign direct investment (FDI) and foreign aid projects, sometimes increase public support for politicians and sometimes create public backlash. The overarching argument in this dissertation is that politicians' financial commitments to FFDPs determine whether they experience public backlash or support. Citizens expect their politicians to champion only high-quality FFDPs. These are projects that are perceived as effective in improving the living standards of a community. When politicians' choices diverge from these expectations, they face backlash.
The first paper offers the theoretical foundation by introducing a political accountability model that describes why there is backlash to FFDPs. This model asserts that FFDP outcomes are important, but not necessary to explain voter backlash. Outcomes help citizens to overcome uncertainty about an FFDP’s quality since positive outcomes correlate with higher quality. Thus, to increase politicians’ responsiveness to voter preferences in the realm FFDP, the model emphasizes the need for more detailed ex-ante information about incoming FFDPs. The model also generates a set of testable predictions about the behavior of politicians that provide new insights into existing empirical patterns.
In the second paper, I test the micro-foundations of my argument, focusing on the interplay between FDI and investment incentives. Through a survey experiment in the US, I exposed participants to FDI projects with randomly generated project characteristics of varying quality. Findings corroborate the theory: politicians risk losing public support when they offer incentives to low-quality FDI projects. Furthermore, offering competitive incentive packages boosts public approval only among high-quality projects.
The third paper looks at how transparency affects the disbursement of investment incentives by scrutinizing greenfield FDI projects in the US spanning 2010 to 2019. Results indicate a discernible pattern: politicians are more inclined to extend incentives to high-quality projects. This effect of quality is amplified in counties with a daily newspaper presence. Furthermore, counties boasting daily newspapers generally attract higher-quality FDI projects. This underscores transparency's paramount role in ensuring politicians' investment promotion efforts resonate with voters' preferences.
Table of Contents
Introduction Why do Development Projects Create Political Backlash? The Role of Outcomes, Financial Support, and Project Quality Beyond Pandering: Investment Project Quality, Voter Support, and the Use of Investment Incentives Quality of Quantity: Transparency and the Attraction of FDI Projects Conclusion Appendix A Why do Development Projects Create Political Backlash? The Role of Outcomes, Financial Support, and Project Quality Appendix B Beyond Pandering: Investment Project Quality, Voter Support, and the Use of Investment Incentives Appendix C Quality of Quantity: Transparency and the Attraction of FDI Projects
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Fooling All the People All the Time? The Domestic Political Effects of Foreign-Funded Development Projects () | 2023-09-14 13:46:33 -0400 |
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