IDEAS home Printed from
   My bibliography  Save this paper

Incentive Solutions




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, or by international trade treaties, 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, accessibility, and performance in incentives, and better benefit-cost analyses of incentives.

Suggested Citation

  • Timothy J. Bartik, 2004. "Incentive Solutions," Upjohn Working Papers and Journal Articles 04-99, W.E. Upjohn Institute for Employment Research.
  • Handle: RePEc:upj:weupjo:04-99
    Note: A revised version of this paper titled "Solving the Problems of Economic Development Incentives" appears in Growth and Change, 36(2), Spring 2005.

    Download full text from publisher

    File URL:
    Download Restriction: This material is copyrighted. Permission is required to reproduce any or all parts.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Timothy J. Bartik, "undated". "What Should the Federal Government Be Doing About Urban Economic Development?," Upjohn Working Papers and Journal Articles tjb1994c, W.E. Upjohn Institute for Employment Research.
    2. Alan H. Peters, 1993. "Clawbacks and the Administration of Economic Development Policy in the Midwest," Economic Development Quarterly, , vol. 7(4), pages 328-340, November.
    3. 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.
    4. 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.
    5. Timothy J. Bartik, 1996. "Eight issues for policy toward economic development incentives," The Region, Federal Reserve Bank of Minneapolis, issue Jun, pages 43-46.
    6. Michael Wasylenko, 1997. "Taxation and economic development: the state of the economic literature," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 37-52.
    7. William H. Oakland & William A. Testa, 1996. "State-local business taxation and the benefits principle," Economic Perspectives, Federal Reserve Bank of Chicago, issue Jan, pages 2-19.
    8. Paul Osterman & Rosemary Batt, 1993. "Employer-centered training for international competitiveness: Lessons from state programs," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(3), pages 456-477.
    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. Mark Drabenstott, 2006. "Rethinking federal policy for regional economic development," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 115-142.

    More about this item


    economic; development; incentives; local; regional; Bartik; solutions;

    JEL classification:

    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:upj:weupjo:04-99. 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: (). 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.