Political Economy of Subsidy Decisions

Slattery and Zidar's (2020) research sheds light on the political factors influencing subsidy decisions. They find that increases in state per capita incentive spending are more likely in election years when the incumbent governor is eligible for reelection. This suggests that political motivations, rather than pure economic considerations, play a significant role in subsidy allocation decisions[17].

This finding has important implications for Idaho. It suggests that the state's subsidy decisions may be influenced more by electoral cycles and political considerations than by sound economic analysis. This politicization of economic development policy could lead to suboptimal outcomes for Idaho's economy.