The Value of Political Geography: Evidence from the Redistricting of Firms

Abstract: We demonstrate that political geography has value to firms. We do so by exploiting shocks to political maps that occur around constitutionally mandated redistricting cycles in the United States. These shocks keep some firms in Congressional districts that are largely unchanged at one extreme and move firms to entirely new districts with a different set of constituents at the other extreme. We find that firms benefit from relatively less geographic change and firms suffer from being moved into districts that are more competitive across parties relative to safer districts or no change. The effects are not trivial in magnitude. Moreover, they do not depend on whether the firm will retain the same politician or is active in making campaign contributions.