Firms as Electoral Monopsonies

We study how dominant employers can act as electoral monopsonies, directly shaping electoral outcomes by leveraging local labor market power. We consider a model where a dominant employer can reshape the political preferences of the local electorate by conditioning their degree of economic activity on electoral outcomes. This form of electoral interference creates polarization in the community: some voters turn against redistributive policy, in some cases strongly, as they may benefit from the firm's economic activiy. Over time, however, the firm's influence undermines local institutions and labor markets, ultimately harming all voters and, in some cases, the firm itself. Using U.S. individual voting records data and a shift-share instrument based on national industry trends and historical local employment patterns, we test the model's predictions and show that areas with higher employment concentration are more likely to see increased voter registration, turnout, and campaign donations for the Republican party. These political shifts are accompanied by long-run declines in population, labor force, tax base, and per capita public sector size.