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Solving the Problems of Economic Development Incentives

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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, "undated". "Solving the Problems of Economic Development Incentives," Upjohn Working Papers tjb2005gc, W.E. Upjohn Institute for Employment Research.
    • Handle: RePEc:upj:weupjo:tjb2005gc
    Note: Appears in Growth and Change 36(2): 139-166
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    File URL: http://onlinelibrary.wiley.com/doi/10.1111/j.1468-2257.2005.00272.x/abstract
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    References listed on IDEAS

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    1. 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, August.
    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 & 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.
    4. 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.
    5. 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, August.
    6. 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.
    7. Timothy J. Bartik, 2003. "Thoughts on American Manufacturing Decline and Revitalization," Upjohn Working Papers 03-96, W.E. Upjohn Institute for Employment Research.
    8. 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, August.
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    More about this item

    Keywords

    local economic development; tax incentives;

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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