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The Influence of Targeted Economic Development Tax Incentives on County Economic Growth: Evidence From Michigan’s MEGA Credits

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  • Michael J. Hicks

    (Ball State University, Muncie, IN, USA, mhicks@bsu.edu)

  • Michael LaFaive

    (Mackinac Center for Public Policy, Midland, MI, USA)

Abstract

This article estimates the county-level impact of the Michigan Economic Growth Authority (MEGA) Credit targeted tax incentives to firms from 1995 through 2002. The authors employ a fixed effects instrumental variable model with spatial and time autocorrelation function tested on aggregate income, employment, the unemployment rate, and sectoral activity in manufacturing, wholesale, and construction. The authors find no impacts of the MEGA credit program on county-level aggregate employment, unemployment rates, wages, or incomes. Furthermore, there is no impact of manufacturing or warehousing credits on employment or wages in these sectors. The authors do find that MEGA credits produce a transient impact on construction employment (a drop in construction wages is statistically but not economically significant). The construction impact of MEGA is an estimated $123,000 investment per construction job. Generally, 75% of these jobs last for 1 year, with the remaining 25% lasting only into the second year.

Suggested Citation

  • Michael J. Hicks & Michael LaFaive, 2011. "The Influence of Targeted Economic Development Tax Incentives on County Economic Growth: Evidence From Michigan’s MEGA Credits," Economic Development Quarterly, , vol. 25(2), pages 193-205, May.
    • Handle: RePEc:sae:ecdequ:v:25:y:2011:i:2:p:193-205
    DOI: 10.1177/0891242410395135
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    References listed on IDEAS

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    Cited by:

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    2. Timothy J. Bartik, 2018. ""But For" Percentages for Economic Development Incentives: What percentage estimates are plausible based on the research literature?," Upjohn Working Papers 18-289, W.E. Upjohn Institute for Employment Research.
    3. Laura A. Reese, 2014. "The Alchemy of Local Economic Development," Economic Development Quarterly, , vol. 28(3), pages 206-219, August.
    4. T. William Lester & Nichola J. Lowe & Allan Freyer, 2014. "Mediating Incentive Use," Economic Development Quarterly, , vol. 28(2), pages 132-146, May.
    5. Timothy J. Bartik & Kevin Hollenbeck, 2012. "An Analysis of the Employment Effects of the Washington High Technology Business and Occupation (B&O) Tax Credit," Upjohn Working Papers 12-187, W.E. Upjohn Institute for Employment Research.
    6. Garsous, Grégoire & Corderi, David & Velasco, Mercedes, 2015. "Tax Incentives and Job Creation in the Tourism Industry of Brazil," IDB Publications (Working Papers) 7324, Inter-American Development Bank.
    7. 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 12-185, W.E. Upjohn Institute for Employment Research.
    8. Thaiprasert, Nalitra & Hicks, Michael J., 2011. "Industrial Growth in Indiana: Demand Side Decomposition, 2001-2006," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 41(1), pages 1-17.

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