This paper reviews the research literature relevant to economic development incentives provided by state and local governments, and recommends reforms in these incentives. I argue that the main problem with current incentive policies is that state and local governments often provide incentives that are not in the best interest of that state or local area, for example that are excessively costly per job created, or that provide jobs that do not improve the job opportunities of local residents. I suggest that reforms should be "bottom-up" rather than "top-down." Regulation of incentives by the federal government, or by international trade treaties, may prevent both desirable and undesirable incentives. "Bottom-up" reforms would include more information on incentive offers, a budget constraint on the volume of incentives, stronger standards for job quality, accessibility, and performance in incentives, and better benefit-cost analyses of incentives.
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Paper provided by W.E. Upjohn Institute for Employment Research in its series Staff Working Papers with number
04-99.
Length: Date of creation: Feb 2004 Date of revision: Handle: RePEc:upj:weupjo:04-99
Note: A revised version of this paper titled "Solving the Problems of Economic Development Incentives" appears in Growth and Change, 36(2), Spring 2005. Contact details of provider: Postal: 300 S. Westnedge Ave. Kalamazoo, MI 49007 USA Phone: 1-616-343-5541 Fax: 1-616-343-7310 Web page: http://www.upjohninstitute.org
Find related papers by JEL classification: R58 - Urban, Rural, and Regional Economics - - Regional Government Analysis - - - Regional Development Policy R38 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Government Policies; Regulatory Policies H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
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