DESARROLLO DE LA PRIMERA PROPUESTA DE SIMULACIÓN

The clear benefits of HQ operation on the localities renders HQ inflow a positive event. HQ inflow signals that the incumbent is doing her job well for the local economy, and future economic conditions are expected be favorable. Receiving such positive signals, citizens are more likely to vote for the incumbent party.

However, the negative event of an HQ outflow generates a different prediction. High corporate tax rates and unfriendly business policies constitute the main push factors. This information crucially interacts with the voters’ perceived partisan policy orientation toward business and corporate tax in the wake of HQ outflow. The Demo- cratic Party and the Republican Party are perceived as having opposing positions for business policies and the corporate tax rates. The Republican Party, often labeled as the pro-business party, is perceived as supporting policies favorable to businesses such as decreasing corporate tax rates, whereas the Democratic Party is perceived as being favorable to labor, supporting policies like increasing corporate tax burdens (Quinn and Shapiro, 1991). On the basis of such partisan heuristics, voters estimate that there is a higher likelihood of state-level HQ outflow under Democratic rather than under Republican governorship. Voters are therefore eased into attributing blame to the former and into supporting the latter in the hope of forestalling the repetition of the negative outcome. For example, Kimberley-Clark’s relocation of its HQ from Wisconsin to Texas in 1985 sounded a public alarm centering on claims that Wis-

consin’s unfriendly business climate as evidenced by the state’s high corporate tax rates had pushed the paper giant out of the state, resulting in an economic catastro- phe. At that time, Wisconsin was notorious for its high tax rates, sometimes referred to as “tax hell,” and the relocation of Kimberly-Clark’s HQ was a catalyzing event that provoked public resentment and wariness. The Kimberly-Clark case eventually turned out to be a major contributing factor to the incumbent Democratic governor’s loss in the following gubernatorial election in 1986 (Dresang and Sidorick, 2002).

Furthermore, the well-established connection between the Democratic Party and less-friendly business policies means that the Republican Party is better positioned to shift the blame for HQ outflow to the Democratic Party than the latter. The Re- publican Party can blame the Democratic Party by emphasizing that party’s creation of an unfavorable business climate as the reason for the outflow. This practice is well illustrated in the former New Jersey governor, Chris Christie’s 2015 State of the State address immediately after Mercedes Benz USA had announced its decision to relocate its HQ from New Jersey to Georgia:

“Mercedes, in New Jersey since the early 1970’s, is leaving for a very simple reason—it costs less to do business in Georgia than it does in New Jersey. Don’t take my word for it—the leaders of Mercedes said it themselves. Economic incentive laws help—but lower taxes are better . . . Yet I cannot make this a reality alone. It is you, and only you, the (Democratic) State Legislature, who can lower taxes further and make New Jersey more prosperous for our middle class families and their children.”

from retrospective blame attribution. Voters are more likely to cast votes for a Re- publican candidate whose policy is believed to lessen the chance of HQ outflow than for a Democratic candidate. In order to deter negative events from recurring, voters can demand that the business climate be improved, resulting in electoral benefits to the Republican Party. In this sense, when HQ relocated out, Republican candidates can also better convince voters that their party is best positioned to solve the problem in political campaigns. This logic is applied regardless of which party is in power. Even under Republican governorship, the heightened demand for business-inducing policies implies further support for the Republican Party.

Given that the Republican Party is an electoral beneficiary of HQ outflow, does the party have an incentive to provoke firms to relocate out of state? The answer is no: Although the Republican Party benefits electorally from HQ outflow, any policy designed to facilitate it will result in net electoral losses. Business policies that push a HQ out of state hurt core supporters, i.e., local business owners. Almost every strategy likely to push firms out of state, such as an increase in the corporate tax rate, runs contrary to the interests of the Republican Party’s core constituencies. Also, related to this phenomenon, policies that increase the chance of outflow are in opposition to the party’s general policy orientation. A deviation of this nature,

therefore, would erode the party’s identity.16

16_{Still, the Republican party can indirectly affect HQ outflow by not making efforts to retain the}

HQ when a firm threatens to move out given that such negotiations are seldom publicized and the incentive package itself can even result in political backlash.