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Determinants Of Economic Development Incentives Offered By States: A Test Of The Arms Race Hypothesis

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  • Mark A. Jenn

    (Marquette University)

  • Farrokh Nourzad

    (Marquette University)

Abstract

This paper tests the "arms race" hypothesis, which postulates that states tend to increase their incentive offerings to new firms if such incentive programs are in use in other states that are perceived to be direct competitors. Using a pooled time-series/cross-section sample of twelve states covering the period from 1969 through 1985 and a model that controls for the effects of various economic and political factors, we find strong support for the "arms race" hypothesis. This result is robust to the alternative specifications of the incentive offerings and different measures of the degree of competition among states.

Suggested Citation

  • Mark A. Jenn & Farrokh Nourzad, 1996. "Determinants Of Economic Development Incentives Offered By States: A Test Of The Arms Race Hypothesis," The Review of Regional Studies, Southern Regional Science Association, vol. 26(1), pages 1-16, Summer.
    • Handle: RePEc:rre:publsh:v:27:y:1996:i:1:p:1-16
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    References listed on IDEAS

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    1. Bartik, Timothy J, 1985. "Business Location Decisions in the United States: Estimates of the Effects of Unionization, Taxes, and Other Characteristics of States," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 14-22, January.
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    Cited by:

    1. 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.
    2. Raghbendra Jha & Hari K. Nagarajan & Kolumum R. Nagarajan, 2013. "Fiscal Federalism and Competitive Bidding for Foreign Investment as a Multistage Game," Departmental Working Papers 2013-04, The Australian National University, Arndt-Corden Department of Economics.
    3. Connaughton, John E. & Madsen, Ronald A., 2001. "Assessment of Economic Impact Studies: The Cases of BMW and Mercedes-Benz," The Review of Regional Studies, Southern Regional Science Association, vol. 31(3), pages 293-303, Winter.
    4. 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.

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