Economic growth is a major concern for state governments. One method that states use to spur economic growth is recruiting firms to relocate or expand within their state. Headlines and press releases from high–profile recruitment cases suggest that states compete with each other to recruit firms. The primary question in this dissertation is whether states compete to recruit firms. A unique panel data set that captures a state’s firm recruitment effort now provides the opportunity to answer this question. A variety of econometric methods (2SLS, MLE, and GS2SLS–GMM) isolate the spatial interdependence effect, and the empirical results show states do compete with each other to recruit firms. Another question answered in this dissertation is whether it matters how researchers measure a state’s effort to recruit firms. The results reveal that it is important to capture only spending related to firm recruitment, as other measures provide fundamentally different results. In addition, this dissertation tests for the nature of rivalry between states and shows that states compete with other states that are economically or demographically similar. The results of competition are not only robust, but large in magnitude as well. States are very responsive to their rival’s effort to recruit firms. Can states stop spending on firm recruitment? If they do, the other states will capture their potential firms–thus the competition to recruit firms does not seem likely to end soon.

Local governments do not operate in a vacuum. Instead, they are part of a complex “polycentric” system of governments where politically autonomous and self-ruled cities compete with one another over taxable wealth. Missing from the scholarship on metropolitan governance is an understanding of the factors driving competition among local governments. The purpose of this dissertation is to fill this gap by examining how interjurisdictional competition over economic development impacts a city’s choice of strategies for attracting business and residential investment and how those strategies affect revenue collection. First, this dissertation examines whether cities, knowing the economic development strategies of their neighboring cities, pursue similar types of businesses? Or do cities strategically target different types of businesses as a way to avoid the negative consequences of competition? Second, this dissertation explores what impact the decision to pursue similar or dissimilar businesses has on the revenue collection of local governments. Using spatial data analysis to analyze a sample of 2,299 cities, this dissertation finds general support for both theoretical frameworks presented. Overall, the findings from both analyses provide unique insights into metropolitan governance and interjurisdictional competition.