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Do State Economic Development Incentives Create Jobs? An Analysis of State Employment Tax Credits

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  • Faulk, Dagney
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    Abstract

    Employment tax credits have become one of the primary tools of state economic development policy. A recurring question is whether these credits create jobs that would not have been created in their absence. This paper provides estimates of the employment impact of such credits by comparing the employment change in eligible firms that participate in employment tax credit programs with eligible firms that do not participate in such programs. Results from a switching regression model indicate that firms taking Georgia’s Jobs Tax Credit created 23 to 28 percent more jobs than eligible firms not taking the credit between 1993 and 1995. The cost per job is $2280 to $2680 over the 1993 to 1995 period. While the maximum number of jobs potentially attributable to the program is small, the cost per job is also low especially when compared with firm–specific incentive packages.

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    Bibliographic Info

    Article provided by National Tax Association in its journal National Tax Journal.

    Volume (Year): 55 (2002)
    Issue (Month): N. 2 (June)
    Pages: 263-280

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    Handle: RePEc:ntj:journl:v:55:y:2002:i:n._2:p:263-280

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    1. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, December.
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    Cited by:
    1. Timothy J. Bartik & George A. Erickcek, 2012. "Simulating the Effects of Michigan's MEGA Tax Credit Program on Job Creation and Fiscal Benefits," Upjohn Working Papers and Journal Articles 12-185, W.E. Upjohn Institute for Employment Research.
    2. Enrico Moretti & Daniel J. Wilson, 2013. "State Incentives for Innovation, Star Scientists and Jobs: Evidence from Biotech," NBER Working Papers 19294, National Bureau of Economic Research, Inc.
    3. Enrico Moretti, 2010. "Local Labor Markets," NBER Working Papers 15947, National Bureau of Economic Research, Inc.
    4. Low, Sarah A., 2004. "The Indiana Enterprise Zone Program: Fiscal Impact Of A Job Creation Tax Credit," 2004 Annual meeting, August 1-4, Denver, CO 19917, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. William Hoyt & Christopher Jepsen & Kenneth Troske, 2009. "Business Incentives and Employment: What Incentives Work and Where?," Working Papers 2009-02, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
    6. Nizalov, Denys & Loveridge, Scott, 2005. "The Differential Impact of Regional Policies on Economic Growth: One Size Does Not Fit All," 2005 Annual meeting, July 24-27, Providence, RI 19360, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Wall, Howard, 2013. "Robbing Peter to Pay Paul: The Employment Effects of the Missouri Quality Jobs Program," MPRA Paper 50605, University Library of Munich, Germany.

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