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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.

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  • 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), pages 1-13.
    • Handle: RePEc:ags:jrapmc:132245
    DOI: 10.22004/ag.econ.132245
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    References listed on IDEAS

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    1. Dan S. Rickman, 1992. "Estimating The Impacts Of Regional Business Assistance Programs: Alternative Closures In A Computable General Equilibrium Model," Papers in Regional Science, Wiley Blackwell, vol. 71(4), pages 421-435, October.
    2. Lau, Morten I. & Pahlke, Andreas & Rutherford, Thomas F., 2002. "Approximating infinite-horizon models in a complementarity format: A primer in dynamic general equilibrium analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 26(4), pages 577-609, April.
    3. 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.
    4. 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.
    2. Solomon Tsehay Feleke & Alemnesh Gebreselassie & Zerayehu Eshete & Asmayit Tekeste & Lulit Mitik Beyene, 2019. "Resource Allocation across Industrial Sectors, Growth, Poverty, and Income Inequality in Ethiopia: A Macro-Micro Approach," Working Papers MPIA 2019-16, PEP-MPIA.
    3. Kilkenny, Maureen & Partridge, Mark D., 2008. "Rural Growth and the Rural Capital Account," 2007 Agricultural and Rural Finance Markets in Transition, October 4-5, 2007, St. Louis, Missouri 48145, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    4. Terry L. Besser & Nicholas Recker & Matthew Parker, 2009. "The Impact of New Employers From the Outside, the Growth of Local Capitalism, and New Amenities on the Social and Economic Welfare of Small Towns," Economic Development Quarterly, , vol. 23(4), pages 306-316, November.

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