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Solving the Problems of Economic Development Incentives




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 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 and job accessibility for the local unemployed, and better benefit-cost analyses of incentives. Copyright 2005 Blackwell Publishing Ltd..

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  • Timothy J. Bartik, 2005. "Solving the Problems of Economic Development Incentives," Growth and Change, Wiley Blackwell, vol. 36(2), pages 139-166.
  • Handle: RePEc:bla:growch:v:36:y:2005:i:2:p:139-166

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    References listed on IDEAS

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    Cited by:

    1. Jeffrey Thompson, 2010. "Prioritizing Approaches to Economic Development in New England: Skills, Infrastructure, and Tax Incentives," Published Studies priorities_september7_per, Political Economy Research Institute, University of Massachusetts at Amherst.
    2. Timothy J. Bartik & George Erickcek, 2010. "The Employment and Fiscal Effects of Michigan's MEGA Tax Credit Program," Upjohn Working Papers and Journal Articles 10-164, W.E. Upjohn Institute for Employment Research.
    3. Carlianne Patrick, 2014. "The economic development incentives game: an imperfect information, heterogeneous communities approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 137-156, August.
    4. Accetturo, Antonio & de Blasio, Guido, 2012. "Policies for local development: An evaluation of Italy's “Patti Territoriali”," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 15-26.
    5. Mark D. Partridge & Dan S. Rickman & M. Rose Olfert & Ying Tan, 2015. "When Spatial Equilibrium Fails: Is Place-Based Policy Second Best?," Regional Studies, Taylor & Francis Journals, vol. 49(8), pages 1303-1325, August.
    6. Timothy J. Bartik & George A. Erickcek, 2012. "Simulating the Effects of Michigan's MEGA Tax Credit Program on Job Creation and Fiscal Benefits," Upjohn Working Papers and Journal Articles 12-185, W.E. Upjohn Institute for Employment Research.
    7. Timothy J. Bartik & George Erickcek, 2014. "Simulating the Effects of the Tax Credit Program of the Michigan Economic Growth Authority on Job Creation and Fiscal Benefits," Economic Development Quarterly, , vol. 28(4), pages 314-327, November.
    8. Tyler Cowen, 2007. "When should regions bid for artistic resources?," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 20(1), pages 1-10, March.
    9. Bukenya, James O., 2009. "Employment Growth in the Rural South: Do Sectors Matter?," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 45903, Southern Agricultural Economics Association.
    10. Paul Rothstein & Nathan Wineinger, 2007. "Transferable tax credits in Missouri: an analytical review," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Nov, pages 53-74.
    11. Kaitlyn Harger & Amanda Ross, 2014. "Do Capital Tax Incentives Attract New Businesses? Evidence across Industries from the New Markets Tax Credit," Working Papers 14-14, Department of Economics, West Virginia University.
    12. Vanessa Stjernborg & Ola Mattisson, 2016. "The Role of Public Transport in Society—A Case Study of General Policy Documents in Sweden," Sustainability, MDPI, Open Access Journal, vol. 8(11), pages 1-16, November.
    13. Terry Clower, 2011. "Economic Development Incentives and the Measurement of Local Endogenous Growth: Is There a Need for Modeling Adjustment?," Chapters,in: Endogenous Regional Development, chapter 14 Edward Elgar Publishing.
    14. Amanda Ross & Kaitlyn Wolf, 2014. "Do Market-Based Tax Incentives Attract New Businesses? Evidence from the New Markets Tax Credit," ERSA conference papers ersa14p653, European Regional Science Association.

    More about this item

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes


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