Abstract
Economic development incentives by state and local governments have been shown to have little positive economic effect on employment or growth. Using a political economy approach, we investigate the characteristics associated with fiscal conditions and public policies within a state that affect if a state uses targeted economic development incentives. Using data from 1993-2014 from Good Jobs First, we employ a Poisson model to investigate whether states with budget issues, high tax and regulatory burdens, and poorly trained labor are offering targeted incentives to potentially offset costly economic conditions. Our results indicate that unemployment rates, fiscal policy conditions, and individual income tax burden explain the granting of targeted incentives by local governments.
Highlights
State and local governments justify the use of targeted economic incentives, such as loan guarantees and tax abatements, by claiming they create jobs and stimulate economic growth
We think that a political economy approach to examining these factors may shed light on why targeted tax incentives persist
While political economists have given attention to the political benefits to vote maximizing politicians, we suggest a slightly different political economy view
Summary
State and local governments justify the use of targeted economic incentives, such as loan guarantees and tax abatements, by claiming they create jobs and stimulate economic growth. While the use of these targeted economic incentives policies is widespread among state and local governments, many scholars and policy makers have repeatedly questioned their efficacy. Whether or not state development incentives lead to real job creation and economic growth has been the subject of much debate among economic scholars. Economists and policy makers have argued that competition among states to entice companies through targeted incentives provides no net gain to the U.S economy.. What follows are the findings in the literature on the effects of these policies on state economic growth, job creation, tax revenues, and the rent-seeking and corruption that appear to accompany targeted incentives
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
