IDEAS home Printed from https://ideas.repec.org/a/sae/ecdequ/v34y2020i2p116-125.html
   My bibliography  Save this article

Economic Development Incentives: What Can We Learn From Policy Regime Changes?

Author

Listed:
  • Jia Wang
  • Weici Yuan
  • Cynthia Rogers

Abstract

The authors investigate state-level economic incentive policies in the United States using the Panel Database on Incentives and Taxes for economic development (PDIT). Although interest in evaluating the efficacy of tax and incentive programs is growing, data limitations are formidable: Tax policies and expenditures are difficult to track and administrators are not equipped to gather the data needed for rigorous evaluation. The PDIT covers 45 industries in 32 U.S. states, including the main cities in the 30 largest metropolitan areas. The PDIT simulates the value of an incentive in terms of value added of a hypothetical firm in a particular industry, state, and year from 1990 to 2015. The authors identify and exploit large, discrete changes in incentive policies (e.g., regime changes). Applying the difference-in-differences method, they investigate potential causal links between regime changes and medium-run economic outcomes, including employment, establishment counts, wages, and poverty rates.

Suggested Citation

  • Jia Wang & Weici Yuan & Cynthia Rogers, 2020. "Economic Development Incentives: What Can We Learn From Policy Regime Changes?," Economic Development Quarterly, , vol. 34(2), pages 116-125, May.
    • Handle: RePEc:sae:ecdequ:v:34:y:2020:i:2:p:116-125
    DOI: 10.1177/0891242420909899
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0891242420909899
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0891242420909899?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Chirinko, Robert S. & Wilson, Daniel J., 2008. "State investment tax incentives: A zero-sum game?," Journal of Public Economics, Elsevier, vol. 92(12), pages 2362-2384, December.
    2. Mikael Lindahl & Alan B. Krueger, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
    3. Smith, Brock, 2015. "The resource curse exorcised: Evidence from a panel of countries," Journal of Development Economics, Elsevier, vol. 116(C), pages 57-73.
    4. Eduardo Cavallo & Sebastian Galiani & Ilan Noy & Juan Pantano, 2013. "Catastrophic Natural Disasters and Economic Growth," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1549-1561, December.
    5. Jia Wang & Stephen E. Ellis & Cynthia Rogers, 2018. "Income Inequality and Economic Development Incentives in US States: Robin Hood in Reverse?," The Review of Regional Studies, Southern Regional Science Association, vol. 48(1), pages 93-117, Spring.
    6. Mark W. Frank, 2009. "Inequality And Growth In The United States: Evidence From A New State‐Level Panel Of Income Inequality Measures," Economic Inquiry, Western Economic Association International, vol. 47(1), pages 55-68, January.
    7. de Bartolome, Charles A. M. & Spiegel, Mark M., 1997. "Does State Economic Development Spending Increase Manufacturing Employment?," Journal of Urban Economics, Elsevier, vol. 41(2), pages 153-175, March.
    8. Jensen,Nathan M. & Malesky,Edmund J., 2019. "Incentives to Pander," Cambridge Books, Cambridge University Press, number 9781108408530.
    9. Ellis, Stephen & Rogers, Cynthia, 2000. "Local Economic Development as a Prisoners' Dilemma: The Role of Business Climate," The Review of Regional Studies, Southern Regional Science Association, vol. 30(3), pages 315-330, Winter.
    10. Matthew Mitchell & Daniel Sutter & Scott Eastman, 2018. "Political Economy of Targeted Economic Development Incentives, The," The Review of Regional Studies, Southern Regional Science Association, vol. 48(1), pages 1-9, Spring.
    11. Peter S. Fisher & Alan H. Peters, 1998. "Industrial Incentives: Competition among American Cities and States," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ii, August.
    12. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    13. Jérôme Vandenbussche & Philippe Aghion & Costas Meghir, 2006. "Growth, distance to frontier and composition of human capital," Journal of Economic Growth, Springer, vol. 11(2), pages 97-127, June.
    14. Carlianne Patrick, 2016. "Identifying The Local Economic Development Effects Of Million Dollar Facilities," Economic Inquiry, Western Economic Association International, vol. 54(4), pages 1737-1762, October.
    15. Peter Calcagno & Frank Hefner, 2018. "Targeted Economic Incentives: An Analysis of State Fiscal Policy and Regulatory Conditions," The Review of Regional Studies, Southern Regional Science Association, vol. 48(1), pages 71-91, Spring.
    16. Wang, Jia, 2018. "Strategic interaction and economic development incentives policy: Evidence from U.S. States," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 249-259.
    17. Katharine L. Bradbury & Yolanda Kodrzycki & Robert Tannenwald, 1997. "Effects of state and local public policies on economic development: an overview," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 1-12.
    18. Kenyon, Daphne A. & Langley, Adam H. & Paquin, Bethany P., 2012. "Property Tax Incentive Pitfalls," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(4), pages 1011-1021, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrew Hanson, 2021. "Taxes and Economic Development: An Update on the State of the Economics Literature," Economic Development Quarterly, , vol. 35(3), pages 232-253, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mitchell, Matt & Farren, Michael & Gonzalez, Olivia & Horpedahl, Jeremy, 2019. "The Economics of a Targeted Economic Development Subsidy," Annals of Computational Economics, George Mason University, Mercatus Center, November.
    2. Carlianne Patrick, 2014. "Does Increasing Available Non-Tax Economic Development Incentives Result in More Jobs?," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(2), pages 351-386, June.
    3. Shaoming Cheng & Hai (David) Guo & Cathy Yang Liu, 2020. "Incentivized for Leveling the Playing Field: Do State Economic Incentives Compensate for High Taxes?," Economic Development Quarterly, , vol. 34(2), pages 101-115, May.
    4. Bruno Ferman & Cristine Pinto & Vitor Possebom, 2020. "Cherry Picking with Synthetic Controls," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(2), pages 510-532, March.
    5. Bibek Adhikari & Romain Duval & Bingjie Hu & Prakash Loungani, 2018. "Can Reform Waves Turn the Tide? Some Case Studies using the Synthetic Control Method," Open Economies Review, Springer, vol. 29(4), pages 879-910, September.
    6. David Gilchrist & Thomas Emery & Nuno Garoupa & Rok Spruk, 2023. "Synthetic Control Method: A tool for comparative case studies in economic history," Journal of Economic Surveys, Wiley Blackwell, vol. 37(2), pages 409-445, April.
    7. Bibek Adhikari & James Alm, 2016. "Evaluating the Economic Effects of Flat Tax Reforms Using Synthetic Control Methods," Southern Economic Journal, John Wiley & Sons, vol. 83(2), pages 437-463, October.
    8. Jia Wang & Stephen E. Ellis & Cynthia Rogers, 2018. "Income Inequality and Economic Development Incentives in US States: Robin Hood in Reverse?," The Review of Regional Studies, Southern Regional Science Association, vol. 48(1), pages 93-117, Spring.
    9. Cailin R. Slattery & Owen M. Zidar, 2020. "Evaluating State and Local Business Tax Incentives," NBER Working Papers 26603, National Bureau of Economic Research, Inc.
    10. Cailin Slattery & Owen Zidar, 2020. "Evaluating State and Local Business Incentives," Journal of Economic Perspectives, American Economic Association, vol. 34(2), pages 90-118, Spring.
    11. Carlianne Patrick, 2014. "The economic development incentives game: an imperfect information, heterogeneous communities approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 137-156, August.
    12. Bibek Adhikari & James Alm, 2016. "Evaluating the Economic Effects of Flat Tax Reforms Using Synthetic Control Methods," Southern Economic Journal, John Wiley & Sons, vol. 83(2), pages 437-463, October.
    13. Samuel Verevis & Murat Üngör, 2021. "What has New Zealand gained from The FTA with China?: Two counterfactual analyses†," Scottish Journal of Political Economy, Scottish Economic Society, vol. 68(1), pages 20-50, February.
    14. Nicolaj N. Mühlbach, 2020. "Tree-based Synthetic Control Methods: Consequences of moving the US Embassy," CREATES Research Papers 2020-04, Department of Economics and Business Economics, Aarhus University.
    15. Jørn Rattsø & Hildegunn E. Stokke, 2011. "Accumulation of education and regional income growth: Limited human capital effects in Norway," Working Paper Series 11211, Department of Economics, Norwegian University of Science and Technology.
    16. Camilla Mastromarco & Léopold Simar, 2021. "Latent heterogeneity to evaluate the effect of human capital on world technology frontier," Journal of Productivity Analysis, Springer, vol. 55(2), pages 71-89, April.
    17. Manca, Fabio, 2011. "Education, Catch-up and Growth in Spain," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 20, pages 5-28.
    18. Aleknavičiūtė Rasa & Skvarciany Viktorija & Survilaitė Simona, 2016. "The Role of Human Capital for National Innovation Capability in Eu Countries," Economics and Culture, Sciendo, vol. 13(1), pages 114-125, June.
    19. Di Maria, C. & Stryszowski, P.K., 2006. "Brain Drain and Distance to Frontier," Other publications TiSEM 01abb5e7-e9ce-4d85-8bc3-5, Tilburg University, School of Economics and Management.
    20. Samer Matta & Michael Bleaney & Simon Appleton, 2022. "The economic impact of political instability and mass civil protest," Economics and Politics, Wiley Blackwell, vol. 34(1), pages 253-270, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:ecdequ:v:34:y:2020:i:2:p:116-125. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.