Does Program Evaluation Affect Program Termination? Insights from the Repeal of Corporate Tax Incentives for the Motion Picture Industry

Abstract

Policy termination is an understudied phenomenon. The literature identifies some factors that affect its likelihood, but others’ importance, especially program evaluation, remain ambiguous. For insight, this study examines the impact of independent program evaluation on the termination of tax incentives for film and television production adopted and then terminated by multiple state governments. Empirical results indicate that termination was significantly more likely after an evaluation showed the incentive’s costs exceeded its benefits. Results also indicate a contagion effect. Other factors, including the incentive’s age and employment in the entertainment industry, reduced termination likelihood. These findings persisted through several robustness and sensitivity checks. Although critical program evaluation does not guarantee termination, it appears to make it a more likely outcome.