Does tax increment financing affect business survival and failure in Chicago, Illinois?

Abstract

ABSTRACT This study examines how and to what extent tax increment financing (TIF) affects changes in business operations—the risk of businesses moving away from their original locations in Chicago, Illinois. Using a Cox proportional hazard regression with multi-year business license datasets, the study finds that TIF districts are not a favorable environment for existing businesses that opened prior to the actual TIF-funded investments, leading to more business closures than their counterparts outside of the districts; on the other hand, new businesses that opened after the TIF investments are better equipped to survive in and around TIF districts than the comparable areas. The study provides a better understanding of the survival and exit patterns of businesses induced by public tax policy, as well as of what factors are ascribed to such business market dynamics and transformations. Findings from this study will yield valuable reference data for both planners and policymakers in decision-making processes for future economic development and corresponding tax policy initiatives.