The Political Effects of Place-Based Policies

Background and Objective

Regional economic disparities and the associated perception of economic and social marginalization are considered among the main causes of the growing political discontent in structurally weak rural areas as well as the observed increase in political polarization in Germany and other industrialized countries. Populist parties receive growing support particularly in regions affected by outmigration, economic decline, and insufficient provision of public goods. Existing studies suggest that the perceived lack of economic prospects in structurally weak regions is often accompanied by perceptions of an incapable (or unwilling) state, rising mistrust in democratic institutions, and a shift away from liberal values.

The primary objective of economic policies targeting structurally weak rural areas is to reduce existing regional disparities. Consequently, such measures may also – directly or indirectly – contribute to mitigating the political dissatisfaction associated with these disparities. A wide range of policy instruments influence the local economic structure of disadvantaged regions, operating through both fiscal and regulatory channels. Examples include classic regional policies such as the EU Cohesion Policy or the German Joint Task for the “Improvement of Regional Economic Structures” (GRW), which supports structurally weak regions through the allocation of credit and investment subsidies. Other examples include regulatory instruments such as the establishment of public authorities and local public services (e.g., schools, universities, or hospitals), as well as legal regulations that primarily benefit firms and sectors located in disadvantaged regions. All of these policy instruments can be summarized under the umbrella of so-called “place-based policies”.

While the economic effects of place-based policies are increasingly well understood, the political effects of such measures have received little attention in quantitative comparative studies. The aim of this project is therefore to examine selected policy instruments with regard to their effects on the political attitudes of citizens in the affected regions. The analysis will focus on various indicators related to local perceptions of regional policies and political attitudes more broadly, such as voter turnout, preferences for populist parties, and trust in democratic institutions.

In addition, the project investigates different mechanisms through which place-based policies may influence political attitudes. For instance, place-based policies may affect political attitudes through improvements in individuals’ economic situations. However, such policies may also influence political attitudes independently of their economic effects, for example by improving perceptions about state capacity in peripheral regions. Conversely, the opposite may occur if individual economic conditions do not improve despite funding, or if policy programs lead to growing intra-regional inequality. Given the diversity and potential heterogeneity of these effects, the analysis will systematically distinguish between three categories of mechanisms: first, direct effects resulting from the regional economic impact of the policy; second, indirect effects related to state capacity more broadly, the mode of implementation of a policy as well as complementary local policy initiatives; and third, heterogeneous effects arising from institutional and cultural-historical differences across regions.

Overall, the project promises valuable insights into how regional policy can contribute to democratic resilience at the regional and local level in times of profound economic change.

Data and Methods

The empirical analysis will draw on various secondary data sources, evaluated at the individual, electoral district, municipal, or county level. These datasets will be compiled into a panel structure and analyzed using microeconometric methods. The choice of empirical strategy and appropriate data will depend on the specific design of the policy measure under investigation. The analysis will consider both traditional regional policy programs and other spatially relevant policy instruments.

To measure the scale and spatial distribution of funding allocations or the scope of regulatory policies—and thus the relative exposure of different regions—detailed data on selected funding programs and other policy instruments will be analyzed. This detailed institutional knowledge, together with existing studies on the economic effects of specific place-based policies, will be used to identify quasi-experimental variation in the spatial distribution of funding (or other policy) criteria and to estimate causal effects on political attitudes. Political attitudes will be measured using aggregate election results or individual-level survey data on support for parties, institutions, and the democratic system, such as those available in the German Socio-Economic Panel (SOEP).

Our Research Questions

• What are the effects of place-based policies on political attitudes and voting behavior in the affected regions?
• Is there spatial heterogeneity in the way place-based policies affect political attitudes?
• Which factors influence the (potentially heterogeneous) effects of place-based policies on political attitudes?