The Politics and Economics of Corporate Subsidies in the 21st Century

States have become more vigorous in providing direct subsidies to businesses small and large. Studies often focus on the necessity of states to compete economically as the primary determinant of economic development policies, such as corporate subsidies. We argue that the political power of business is an important factor to consider. Campaign contributions from business serves to create a political presence that reinforces their structural power and has the potential to capture state govern-ments. We theorize that states may be strictly captured or culturally captured, in which the state acts to protect business without being intentionally corrupted by business. We test our hypothesis using data from the Good Jobs First Subsidy Tracker database, finding that more contributions from business leads to more subsidy spending by the state. We also use the data to evaluate claims made by the economic development literature, finding that there has been a drastic growth in subsidies, that most subsidies are small, but the majority of spending goes to large manufacturing firms. Given these empirical findings, we conclude that subsidies are the result of the confluence of politics and economics, warranting more attention by scholars because of the practical policy and theoretical implications.