IDEAS home Printed from https://ideas.repec.org/a/rre/publsh/v48y2018i1p93-117.html
   My bibliography  Save this article

Income Inequality and Economic Development Incentives in US States: Robin Hood in Reverse?

Author

Listed:
  • Jia Wang

    (University of Dayton)

  • Stephen E. Ellis

    (University of Oklahoma)

  • Cynthia Rogers

    (University of Oklahoma)

Abstract

This paper explores the relationship between the rising use of economic development incentives (EDI) and rising income inequality within U.S. states. It extends the few papers which investigate state and local income inequality outcomes in the U.S. (Goetz et al., 2011; Shuai, 2015) in three important ways. First, it provides a normative argument for reducing inequality as a policy goal, an issue commonly ignored in empirical applications of inequality. Second, it discusses the channels through which EDI policy can influence equality outcomes in a regional context. Finally, it estimates panel data models for 41 states from 2000 to 2009 using direct measures of EDI and three common measures of income inequality: Gini, top 1 percent income share and top 10 percent income share. The results reveal positive and statistically significant relationships between the one-year lag of EDI values and the three inequality measures. Taken as a whole, the results are consistent with a reverse-Robin-Hood effect where more generous EDI use is associated with redistribution of income from the bottom 90 percent to the top 10 percent of the income distribution.

Suggested Citation

  • Jia Wang & Stephen E. Ellis & Cynthia Rogers, 2018. "Income Inequality and Economic Development Incentives in US States: Robin Hood in Reverse?," The Review of Regional Studies, Southern Regional Science Association, vol. 48(1), pages 93-117, Spring.
  • Handle: RePEc:rre:publsh:v48:y:2018:i:1:p:93-117
    as

    Download full text from publisher

    File URL: http://journal.srsa.org/ojs/index.php/RRS/article/view/1008
    File Function: To View On Journal Page
    Download Restriction: no

    File URL: http://journal.srsa.org/ojs/index.php/RRS/article/view/1008/857
    File Function: To Download Article
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    2. M. E. Dewar & B. Hagenlocker, 1996. "Getting to the Bottom Line on Low-interest Loans to Business: An Evaluation of the Small Cities Economic Development Programme in Minnesota," Regional Studies, Taylor & Francis Journals, vol. 30(1), pages 41-54.
    3. François Bourguignon, 2015. "The Globalization of Inequality," Economics Books, Princeton University Press, edition 1, number 10433.
    4. Joseph Persky & Daniel Felsenstein & Virginia Carlson, 2004. "Does "Trickle Down" Work? Economic Development and Job Chains in Local Labor Markets," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number dtdw, November.
    5. Felix, R. Alison & Hines, James R., 2013. "Who offers tax-based business development incentives?," Journal of Urban Economics, Elsevier, vol. 75(C), pages 80-91.
    6. Fuad Hasanov & Oded Izraeli, 2011. "Income Inequality, Economic Growth, And The Distribution Of Income Gains: Evidence From The U.S. States," Journal of Regional Science, Wiley Blackwell, vol. 51(3), pages 518-539, August.
    7. Natalie Brem & Garey Durden & Patricia Gaynor, 1989. "The Effect of Government Employment on Income Inequality Overall and in the South: Evidence from Congressional District Data," The Review of Regional Studies, Southern Regional Science Association, vol. 19(2), pages 40-47, Spring.
    8. Devon Lynch & Jeffrey S. Zax, 2011. "Incidence and Substitution in Enterprise Zone Programs: The Case of Colorado," Public Finance Review, , vol. 39(2), pages 226-255, March.
    9. Carlianne Patrick, 2014. "Does Increasing Available Non-Tax Economic Development Incentives Result in More Jobs?," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(2), pages 351-386, June.
    10. Xiaobing Shuai, 2015. "Do Economic Development Efforts Benefit All? Business Attraction and Income Inequality," The Review of Regional Studies, Southern Regional Science Association, vol. 45(1), pages 35-56, Spring.
    11. Barry T. Hirsch & David A. MacPherson, 2003. "Union Membership and Coverage Database from the Current Population Survey: Note," ILR Review, Cornell University, ILR School, vol. 56(2), pages 349-354, January.
    12. Mr. David Coady & Mr. Sanjeev Gupta, 2012. "Income Inequality and Fiscal Policy," IMF Staff Discussion Notes 2012/008, International Monetary Fund.
    13. Dong‐Hyeon Kim & Ho‐Chuan Huang & Shu‐Chin Lin, 2011. "Kuznets Hypothesis In A Panel Of States," Contemporary Economic Policy, Western Economic Association International, vol. 29(2), pages 250-260, April.
    14. Mark D. Partridge & Dan S. Rickman, 2005. "High-Poverty Nonmetropolitan Counties in America: Can Economic Development Help?," International Regional Science Review, , vol. 28(4), pages 415-440, October.
    15. 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 12-185, W.E. Upjohn Institute for Employment Research.
    16. Mark W. Frank, 2009. "Inequality And Growth In The United States: Evidence From A New State‐Level Panel Of Income Inequality Measures," Economic Inquiry, Western Economic Association International, vol. 47(1), pages 55-68, January.
    17. Tullock, Gordon, 1971. "Public Decisions as Public Goods," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 913-918, July-Aug..
    18. 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.
    19. Ellis, Stephen & Rogers, Cynthia, 2000. "Local Economic Development as a Prisoners' Dilemma: The Role of Business Climate," The Review of Regional Studies, Southern Regional Science Association, vol. 30(3), pages 315-330, Winter.
    20. Miguel Niño‐Zarazúa & Laurence Roope & Finn Tarp, 2017. "Global Inequality: Relatively Lower, Absolutely Higher," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(4), pages 661-684, December.
    21. Stephan J Goetz & Mark D Partridge & Dan S Rickman & Shibalee Majumdar, 2011. "Sharing the Gains of Local Economic Growth: Race-to-the-Top versus Race-to-the-Bottom Economic Development," Environment and Planning C, , vol. 29(3), pages 428-456, June.
    22. Adam Bonica & Nolan McCarty & Keith T. Poole & Howard Rosenthal, 2013. "Why Hasn't Democracy Slowed Rising Inequality?," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 103-124, Summer.
    23. Wang Jia, 2016. "Do Economic Development Incentives Crowd Out Public Expenditures in U.S. States?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(1), pages 513-538, January.
    24. Walter E. Williams, 1996. "The Argument for Free Markets: Morality vs. Efficiency," Cato Journal, Cato Journal, Cato Institute, vol. 15(2-3), pages 179-189, Fall/Wint.
    25. Francesca Bastagli & David Coady & Sanjeev Gupta, 2012. "Income Inequality and Fiscal Policy (2nd Edition)," IMF Staff Discussion Notes 12/08R, International Monetary Fund.
    26. M. Rose Olfert, 2016. "Regional Inequality and Decentralized Governance: Canada's Provinces," The Review of Regional Studies, Southern Regional Science Association, vol. 46(3), pages 201-222, Winter.
    27. Mark D. Partridge & Dan S. Rickman, 2006. "The Geography of American Poverty: Is There a Need for Place-Based Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number gap, November.
    28. Kenyon, Daphne A. & Langley, Adam H. & Paquin, Bethany P., 2012. "Property Tax Incentive Pitfalls," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(4), pages 1011-1021, December.
    29. repec:rre:publsh:v:33:y:2003:i:1:p:17-39 is not listed on IDEAS
    30. Peter A. Diamond, 2016. "Addressing The Forces Driving Inequality In The United States," Contemporary Economic Policy, Western Economic Association International, vol. 34(3), pages 403-411, July.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Diana Barros & Aurora A. C. Teixeira, 2021. "Unlocking the black box: A comprehensive meta-analysis of the main determinants of within-region income inequality," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 41(1), pages 55-93, February.
    2. Jia Wang & Weici Yuan & Cynthia Rogers, 2020. "Economic Development Incentives: What Can We Learn From Policy Regime Changes?," Economic Development Quarterly, , vol. 34(2), pages 116-125, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Jia Wang & Weici Yuan & Cynthia Rogers, 2020. "Economic Development Incentives: What Can We Learn From Policy Regime Changes?," Economic Development Quarterly, , vol. 34(2), pages 116-125, May.
    3. Carlianne Patrick, 2014. "Does Increasing Available Non-Tax Economic Development Incentives Result in More Jobs?," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(2), pages 351-386, June.
    4. Tarkan Cavusoglu & Oguzhan Dincer, 2015. "Does decentralization reduce income inequality? Only in rich states," Southern Economic Journal, John Wiley & Sons, vol. 82(1), pages 285-306, July.
    5. Stephan J Goetz & Mark D Partridge & Dan S Rickman & Shibalee Majumdar, 2011. "Sharing the Gains of Local Economic Growth: Race-to-the-Top versus Race-to-the-Bottom Economic Development," Environment and Planning C, , vol. 29(3), pages 428-456, June.
    6. Ki-Eun Kang & George C. Homsy, 2020. "Make Me a Better Offer: Developer Threats and Regional Competition for Land Development Projects," Economic Development Quarterly, , vol. 34(1), pages 21-30, February.
    7. Peter Calcagno & Frank Hefner, 2018. "Targeted Economic Incentives: An Analysis of State Fiscal Policy and Regulatory Conditions," The Review of Regional Studies, Southern Regional Science Association, vol. 48(1), pages 71-91, Spring.
    8. Wang, Jia, 2018. "Strategic interaction and economic development incentives policy: Evidence from U.S. States," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 249-259.
    9. Iván González Gordón & Budy P. Resosudarmo, 2019. "A sectoral growth‐income inequality nexus in Indonesia," Regional Science Policy & Practice, Wiley Blackwell, vol. 11(1), pages 123-139, March.
    10. Gervasio SEMEDO & Bertrand LAPORTE & Asbath ALASSANI, 2022. "How does tax structure affect income inequality? Empirical evidence from Sub-Saharan Africa," LEO Working Papers / DR LEO 2960, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    11. Chun‐Chieh Huang & Juin‐Jen Chang & Hsiao‐Wen Hung, 2020. "Progressive Tax and Inequality in a Unionized Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(1), pages 38-80, January.
    12. Caroline-Antonia Goerl & Mr. Mike Seiferling, 2014. "Income Inequality, Fiscal Decentralization and Transfer Dependency," IMF Working Papers 2014/064, International Monetary Fund.
    13. Xiaobing Shuai, 2015. "Do Economic Development Efforts Benefit All? Business Attraction and Income Inequality," The Review of Regional Studies, Southern Regional Science Association, vol. 45(1), pages 35-56, Spring.
    14. Łukasz Piętak, 2022. "Regional disparities, transmission channels and country's economic growth," Journal of Regional Science, Wiley Blackwell, vol. 62(1), pages 270-306, January.
    15. Stefano Bartolini & Francesco Sarracino, 2021. "Happier and Sustainable. Possibilities for a post-growth society," Department of Economics University of Siena 855, Department of Economics, University of Siena.
    16. David J. Peters, 2009. "Typology of American Poverty," International Regional Science Review, , vol. 32(1), pages 19-39, January.
    17. Richard Cebula & Milton Kafoglis, 1986. "A note on the Tiebout-Tullock hypothesis: The period 1975–1980," Public Choice, Springer, vol. 48(1), pages 65-69, January.
    18. Saltz, Ira S. & Capener, Don, 2016. "60 Years Later and Still Going Strong: The Continued Relevance of the Tiebout Hypothesis," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 46(1).
    19. 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.
    20. Samira Bakhshi & Mohammad Shakeri & M. Rose Olfert & Mark D. Partridge & Simon Weseen, 2009. "Do Local Residents Value Federal Transfers?," Public Finance Review, , vol. 37(3), pages 235-268, May.

    More about this item

    Keywords

    economic development incentives; income inequality;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

    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:93-117. 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.

    If CitEc recognized a bibliographic 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.

    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.