IDEAS home Printed from
   My bibliography  Save this article

Getting What You Pay For: The Case of Southern Economic Development


  • Rork, Jonathan C.


For the past fifty years, states of the American South have been competing with one another in order to recruit businesses to locate within their borders. While previous research has focused on assessing the short-term success of a tax-based recruitment plan, this paper addresses an important gap in the literature by looking at the long-term consequences that such a development policy can impose on a state’s industrial structure. By incorporating the role of firm mobility, this paper demonstrates that at the state level, the effect of lowering the corporate income tax on the factor intensity of a state’s manufacturing industries is theoretically ambiguous because it is dependent on the type of firm that finds it easier to move. Using historical data from 1957-1992 and a dynamic, partial adjustment model, this paper establishes an empirical link between low corporate tax rates and labor-intensive manufacturing industries, thereby suggesting that a low-tax policy is encouraging the immigration of footloose, laborintensive firms. Moreover, the paper finds that the labor used tends to be of an unskilled (production) nature, even as the national trend is to substitute away from unskilled labor into skilled labor.

Suggested Citation

  • Rork, Jonathan C., 2005. "Getting What You Pay For: The Case of Southern Economic Development," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 35(2).
  • Handle: RePEc:ags:jrapmc:132308

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Timothy J. Bartik, 2010. "Small Business Start-Ups in the United States: Estimates of the Effects of Characteristics of States," Book chapters authored by Upjohn Institute researchers,in: Zolton Acs (ed.), Entrepreneurship and regional Development, pages 155-169 W.E. Upjohn Institute for Employment Research.
    2. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, November.
    3. Taylor, Leon, 1992. "Infrastructural competition among jurisdictions," Journal of Public Economics, Elsevier, vol. 49(2), pages 241-259, November.
    4. Timothy C. Ford & Jonathan C. Rork & Bruce T. Elmslie, 2008. "Foreign Direct Investment, Economic Growth, and the Human Capital Threshold: Evidence from US States," Review of International Economics, Wiley Blackwell, vol. 16(1), pages 96-113, February.
    5. Coughlin, Cletus C & Terza, Joseph V & Arromdee, Vachira, 1991. "State Characteristics and the Location of Foreign Direct Investment within the United States," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 675-683, November.
    6. Gabe, Todd M., 2003. "Local Fiscal Policy and Establishment Growth," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 33(1).
    7. King, I. & McAfee, R.P. & Welling, L., 1990. "Industrial Blackmail," Papers 130, Calgary - Department of Economics.
    8. Rork, Jonathan C., 2003. "Coveting Thy Neighbors' Taxation," National Tax Journal, National Tax Association, vol. 56(4), pages 775-787, December.
    Full references (including those not matched with items on IDEAS)


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

    Cited by:

    1. Dudensing, Rebekka M. & Barkley, David L., 2010. "Competitiveness of Southern Metropolitan Areas: The Role of New Economy Policies," The Review of Regional Studies, Southern Regional Science Association, vol. 40(2), pages 197-226.
    2. Conway, Karen Smith & Rork, Jonathan C., 2012. "The Genesis of Senior Income Tax Breaks," National Tax Journal, National Tax Association, vol. 65(4), pages 1043-1068, December.


    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:ags:jrapmc:132308. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.