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Are Local Economic Development Incentives Promoting Job Growth? An Empirical Case Study

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  • Fuerst, Franz
  • Mollenkopf, John

Abstract

At a time when cities are competing with one another to attract or retain jobs within a globalizing economy, city governments are providing an array of financial incentives to stimulate job growth and retain existing jobs, particularly in high cost locations. This paper provides the first systematic and comprehensive analysis of datasets on economic development incentives in New York City over the last fifteen years. The evidence on job retention and creation is mixed. Although many companies do not meet their agreed-upon job targets in absolute terms, the evidence suggests that companies receiving subsidies outperform their respective industries in terms of employment growth, that is, the grow more, or decline less. We emphasize that this finding is difficult to interpret, since firms receiving incentives may not be representative of the industry as a whole. In other words, their above-average performance may simply reflect the fact that the Economic Development Corporation (EDC) selects economically promising companies within manufacturing (or other industries) when granting incentives. At the same time, it is also possible that receiving incentives helps these companies to become stronger.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11444.

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Date of creation: 10 Sep 2005
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Handle: RePEc:pra:mprapa:11444

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Keywords: economic development incentives; job growth; manufacturing; subsidies; urban development; economic development policy;

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  1. Timothy J. Bartik, . "Jobs, Productivity, and Local Economic Development: What Implications Does Economic Research Have for the Role of Government?," Upjohn Working Papers and Journal Articles tjb1994ntj, W.E. Upjohn Institute for Employment Research.
  2. Robert Tannenwald, 1996. "State business tax climate: how should it be measured and how important is it?," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 23-38.
  3. Todd M. Gabe & David S. Kraybill, 2002. "The Effect of State Economic Development Incentives on Employment Growth of Establishments," Journal of Regional Science, Wiley Blackwell, vol. 42(4), pages 703-730.
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