The dynamic and persistent effects of tax increment financing as an example of place-based policy: evidence from Cook County, Illinois

Abstract

ABSTRACT Using a staggered difference-in-differences design, this paper analyses the effects of tax increment financing (TIF) in Cook County, Illinois. TIF is negatively correlated with the number of establishments in Chicago, likely due to unintended tax burdens and competition between TIF districts. In non-Chicago areas, TIF shows positive effects on employment for 6–20 years. Lastly, this study provides evidence of the persistent effects of TIF and its potential to move localities from low- to high-density economic activity, calling for a re-evaluation of the argument against subsidising economically lagging areas.