Location incentives and the unintentional generation of employment instability:some evidence from Israel

Abstract

This paper examines the effectiveness of location incentives designed to promote industrial investments in peripheral regions as a tool for creating employment opportunities in these regions and encouraging economic growth. The findings are based on Israeli empirical experience. We show that these popular incentives, in addition to being ineffective in securing their goals, also create employment instability in these regions as an undesirable side effect: they encourage the establishment of unstable enterprises that require ongoing support and revolving door enterprises that keep opening and closing down.