I wonder if restricting certain governments from using certain occupation laws would add something to gameplay and reflect the historic differences. Limiting Fascist and National socialist governments from using collaborative governments (at least in certain areas) while democracies can't use the exploitive ones might reflect the history and politics better better and offer a difference between how different nations handled suppressing dissent.
While it does seem a bit odd for Nazi Germany to establish a collaboration government in Poland and occupied parts of the Soviet Union, west of Berlin that's precisely what was done: Norway, the Netherlands, and Belgium all had collaboration governments best represented by the occupation policy of the same name in HoI3. The occupied parts of France that were under Vichy civilian administration were essentially the same.
I agree that it seems wrong that Germany can just set up a collaboration government in Poland for example, but the alternative of locking that out seems wrong too. I think the issue is that Germany, unsurprisingly, treated people differently based on ethnicity/race - to get it right the game would need to lock force Germany to use total exploitation on countries with ethnic majorities hated by Nazis. It
could be kludged that Germany can't use collaboration government by default, with specific events setting the western occupied countries to collaboration - but I expect then players would puppet Poland as a way out.
Personally, I always used collaborative no matter where it was or what nation I played ask for the reasons you spelled out above. I think that if such a choice is almost mandatory then something needs to be changed so it isn't so one sided.
I agree. I used collaboration everywhere as well. Someone else pointed out that manpower is usually the hardest thing to get, whereas you can build new IC. Although sometimes resources are the cap on production so that would drive one toward harsher occupation polities. I think the only time I ever considered using total exploitation was as Nationalist China, since I had ludicrous manpower and not enough IC to use it, which would be where total exploitation is useful - but I'd not invested in military policy so I didn't, in that instance. Point being, if there's a go-to option, the options need rebalancing like you said.
I think collaboration was so useful because of the minimal partisans, as others have said, and then because it gave the most manpower, and then because it gave the most leadership. For most countries it's a no brainer to go for more LS and MP and for many to go for lower partisans, rather than the IC or resources. The manpower bit probably should be nerfed hard, since that's a big part of its appeal, and historically Germany at least got a lot more men from the East than the West; say at least 400,000 from east of Berlin, versus surely under 100,000 from the collaboration areas, probably around 50,000 total.