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Solving the Problems of Economic Development Incentives

In: Reining in the Competition for Capital

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Abstract

ABSTRACT 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.
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Suggested Citation

  • Timothy J. Bartik, 2007. "Solving the Problems of Economic Development Incentives," Book chapters authored by Upjohn Institute researchers, in: Ann Markusen (ed.), Reining in the Competition for Capital, chapter 5, pages 103-139, W.E. Upjohn Institute for Employment Research.
    • Handle: RePEc:upj:uchaps:riccch5
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    References listed on IDEAS

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    1. Timothy J. Bartik, 2003. "Thoughts on American Manufacturing Decline and Revitalization," Upjohn Working Papers 03-96, W.E. Upjohn Institute for Employment Research.
    2. Andrew Haughwout & Robert Inman & Steven Craig & Thomas Luce, 2004. "Local Revenue Hills: Evidence from Four U.S. Cities," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 570-585, May.
    3. 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.
    4. Timothy J. Bartik, "undated". "The Effects of Metropolitan Job Growth on the Size Distribution of Family Income," Upjohn Working Papers tjb1994jrs, W.E. Upjohn Institute for Employment Research.
    5. Timothy J. Bartik & Peter K. Eisinger & George A. Erickcek, 2003. "Economic Development Policy in Michigan," Book chapters authored by Upjohn Institute researchers, in: Charles L. Ballard & Paul N. courant & Douglas C. Drake & Ronald C. Fisher & Elisabeth R. Gerber (ed.),Michigan at the Millennium: A Benchmark and Analysis of Its Fiscal and Economic Structure, pages 279-297, W.E. Upjohn Institute for Employment Research.
    6. Timothy J. Bartik, 1996. "Eight issues for policy toward economic development incentives," The Region, Federal Reserve Bank of Minneapolis, vol. 10(Jun), pages 43-46.
    7. Alan H. Peters & Peter S. Fisher, 2002. "State Enterprise Zone Programs: Have They Worked?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number sezp, November.
    8. Timothy J. Bartik, 2001. "Jobs for the Poor: Can Labor Demand Policies Help?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number tjb2001, November.
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    More about this item

    Keywords

    local economic development; regional economic development; incentives; tax incentives;
    All these keywords.

    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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