Economic development directly manifests itself in the form of employment at the local level. This paper examines the ability of local politics to shape this development in a competitive federalist environment by examining how local party-political developments affect local economic development in Swiss small and medium-sized towns (SMSTs). Local economic development in the form of employment is a central local policy domain in federal and polycentric Switzerland. This paper argues that party-political influence is conditional on the characteristics of four distinguished economic sectors that differ in their dependence on the regional context. By analyzing the panel data of all Swiss SMSTs, the paper finds that local party-political developments only systematically precede growth in the residential economy, while regional processes determine the economic sectors in ambiguous ways. The grip of local politics on the development of export-oriented economies therefore is not guided by party-political development and more influential at regional levels.
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