Institutions and geography together shape economic policies. Policy outcomes are decided by incumbent politicians whose decisions are influenced by a desire to win reelection. Particularistic economic policies, like subsidies, will sometimes be an efficient means by which to win reelection. Subsidizing geographically diffuse groups helps political parties win votes across the country. Such diffuse electoral support is valuable to parties competing in proportional electoral systems with multiple districts because it maximizes the number of seats they hold in parliament. While ocusing exclusively on geographically concentrated groups may increase a party’s vote share in a given district, it limits the party’s national appeal. Leaders in proportional electoral systems are therefore less responsive to the demands of geographically concentrated groups, as compared to diffuse groups. In this chapter, I discuss the mechanisms through which economic geography and electoral institutions work to shape leaders’ policy incentives, notably effective vote maximization and the nature of electoral competition. I also discuss possible alternative mechanisms including government partisanship, factor mobility, party discipline, and electoral competitiveness.