IDEAS home Printed from https://ideas.repec.org/a/rre/publsh/v48y2018i1p55-69.html

Is There a Tradeoff Between Economic Development Incentives and Economic Freedom? Evidence from the US States

Author

Listed:
  • John Dove

    (Troy University)

  • Daniel Sutter

    (Troy University)

Abstract

State and local governments have used targeted incentives to recruit businesses for decades. The relationship between incentives and business formation, employment, and economic growth has been studied in detail. This paper extends this literature by examining the relationship between development incentives and economic freedom – where economic freedom refers to the ability of individuals and firms to enter into contracts and use their property as they see fit without permission from government (Gwartney, Lawson, and Hall, 2016). Optimal tax theory assumes an exogenous government revenue constraint, suggesting that taxes not collected from some businesses result in higher taxes on others, which may negatively impact economic freedom. By contrast, tax breaks could diffuse across firms and thus positively affect economic freedom. The paper investigates this relationship with state-level panel data between 1994 and 2013. We find an economically and statistically significant negative relationship between incentives and freedom, which are robust to several specifications.

Suggested Citation

  • John Dove & Daniel Sutter, 2018. "Is There a Tradeoff Between Economic Development Incentives and Economic Freedom? Evidence from the US States," The Review of Regional Studies, Southern Regional Science Association, vol. 48(1), pages 55-69, Spring.
    • Handle: RePEc:rre:publsh:v48:y:2018:i:1:p:55-69
    as

    Download full text from publisher

    File URL: http://journal.srsa.org/ojs/index.php/RRS/article/view/1002
    File Function: To View On Journal Page
    Download Restriction: no
    File URL: http://journal.srsa.org/ojs/index.php/RRS/article/view/1002/867
    File Function: To Download Article
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

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


    Cited by:

    1. Adam A. Millsap & Bradley K. Hobbs & Dean Stansel, 2019. "Local Governments and Economic Freedom: A Test of the Leviathan Hypothesis," Public Finance Review, , vol. 47(3), pages 493-529, May.
    2. Mitchell, Matt, 2019. "A Culture of Favoritism: Corporate Privilege and Beliefs about Markets and Government," Annals of Computational Economics, George Mason University, Mercatus Center, March.
    3. Mitchell, Matt & Farren, Michael & Gonzalez, Olivia & Horpedahl, Jeremy, 2019. "The Economics of a Targeted Economic Development Subsidy," Annals of Computational Economics, George Mason University, Mercatus Center, November.
    4. Russell S. Sobel & Gary A. Wagner & Peter T. Calcagno, 2024. "The political economy of state economic development incentives: A case of rent extraction," Economics and Politics, Wiley Blackwell, vol. 36(1), pages 104-151, March.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

    Statistics

    Access and download statistics

    Corrections

    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:rre:publsh:v48:y:2018:i:1:p:55-69. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tammy Leonard & Lei Zhang (email available below). General contact details of provider: http://www.srsa.org .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.