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The Alchemy of Local Economic Development

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  • Laura A. Reese

Abstract

Although policy evaluations have raised significant concerns about the effectiveness of individual incentives such as tax abatements and special taxing districts, they beg the question of whether, in the right combination, these tools might actually work. This research focuses on this question: Are some incentives more effective in particular combinations as they would normally be applied in reality? Based on an assessment of five widely used economic development programs in the state of Michigan, the research concludes that even in combination, many commonly used incentives have no relationship to the economic health of city residents. Programs that include performance guarantees, particularly related to jobs, appear promising. For many, particularly smaller, cities offering no economic development incentives also appears to be a promising course of action.

Suggested Citation

  • Laura A. Reese, 2014. "The Alchemy of Local Economic Development," Economic Development Quarterly, , vol. 28(3), pages 206-219, August.
    • Handle: RePEc:sae:ecdequ:v:28:y:2014:i:3:p:206-219
    DOI: 10.1177/0891242414534727
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    References listed on IDEAS

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    1. Anderson, John E. & Wassmer, Robert W., 1995. "The decision to 'bid for business': Municipal behavior in granting property tax abatements," Regional Science and Urban Economics, Elsevier, vol. 25(6), pages 739-757, December.
    2. Robert W. Wassmer & John E. Anderson, 2001. "Bidding for Business: New Evidence on the Effect of Locally Offered Economic Development Incentives in a Metropolitan Area," Economic Development Quarterly, , vol. 15(2), pages 132-148, May.
    3. John E. Anderson & Robert W. Wassmer, 2000. "Bidding for Business: The Efficacy of Local Economic Development Incentives in a Metropolitan Area," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number bb, August.
    4. 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.
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