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Are Economic Development Incentives Worth it? A Computable General Equilibirum Analysis of Pueblo, Colorado's Efforts to Attract Business

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  • Goodman, D. Jay

Abstract

The regional impacts of economic development incentives are studied in the context of a computable general equilibrium (CGE) model. The object is to evaluate the effectiveness of several incentives used to attract new businesses in the city of Pueblo, Colorado. The results show that the regional benefits of these incentives are relatively small, and the net benefits to the local population when all impacts are accounted for are likely to be negative. Instead, the benefits are largely transferred to new businesses and employees who migrate to the region in response to the incentives. Contrary to perceptions about the multiplier impacts of economic development, the net impact on the local manufacturing sector is negative as well. The incentives cause a substitution effect, as investment is shifted toward export-oriented manufacturing sectors that are favored for economic development. These results address the seeming paradox that economic development can attract new businesses and jobs, yet be unpopular enough among local residents for them to vote against continuing it.

Suggested Citation

  • Goodman, D. Jay, 2003. "Are Economic Development Incentives Worth it? A Computable General Equilibirum Analysis of Pueblo, Colorado's Efforts to Attract Business," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 33(1).
  • Handle: RePEc:ags:jrapmc:132245
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    1. Mark D. Partridge & Dan S. Rickman, 1998. "Regional Computable General Equilibrium Modeling: A Survey and Critical Appraisal," International Regional Science Review, , vol. 21(3), pages 205-248, December.
    2. Rutherford, Thomas F, 1999. "Applied General Equilibrium Modeling with MPSGE as a GAMS Subsystem: An Overview of the Modeling Framework and Syntax," Computational Economics, Springer;Society for Computational Economics, vol. 14(1-2), pages 1-46, October.
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    Cited by:

    1. Maureen Kilkenny & Mark D. Partridge, 2009. "Export Sectors and Rural Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 910-929.

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