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In this model, governments act strategically in order
to attract economic activity to their jurisdiction with
the ultimate aim of boosting aggregate growth. Pluralist
renditions emphasize the preferences of electorally significant
firms or groups in clarifying to leaders the interests
they have in such policies (Encarnation and Mason
1990; Goodman and Pauly 1993). In more statist versions,
decision makers take such actions regardless of
the immediate preferences of domestic political groups
(Krasner 1985); in the medium run, they are gambling
on an aggregate growth payoff for which, presumably,
they will be rewarded by continued political support.
In each case, the government faces incentives to anticipate
and match decisions made outside its jurisdiction,
rather than waiting passively for these decisions
to work their way through the international economy,
the domestic economy, and the domestic electoral system.
In an international environment that is assumed to
be institutionally thin and nonhierarchical, the result is
competitive pressure to implement capital- and tradefriendly
policies when major competitors have done so.
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