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Can Local Incentives Alter a Metropolitan City's Economic Development?

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  • Robert W. Wassmer

    (Department of Economics, Wayne State University, Detroit, Michigan 48202, USA)

Abstract

Cities in the US and Europe have chosen increasingly to offer incentives designed to attract and retain local economic development. The increased use of local incentives has occurred with little or no empirical test of their effectiveness. This paper contains a statistical method that can be applied to any group of cities to measure the 'additive effect', or lack of it, that incentives exert on local economic development. Regression analysis applied to cities in the Detroit metropolitan area indicates that incentive efficacy depends on city-specific characteristics and how economic development is measured. Although there are situations where incentive offers exert an additive effect on local economic development, in a majority of situations this is not the outcome.

Suggested Citation

  • Robert W. Wassmer, 1994. "Can Local Incentives Alter a Metropolitan City's Economic Development?," Urban Studies, Urban Studies Journal Limited, vol. 31(8), pages 1251-1278, October.
    • Handle: RePEc:sae:urbstu:v:31:y:1994:i:8:p:1251-1278
    DOI: 10.1080/00420989420081151
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    References listed on IDEAS

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    Cited by:

    1. George A. Erickcek & Hannah McKinney, 2004. "Small Cities Blues: Looking for Growth Factors in Small and Medium-Sized Cities," Upjohn Working Papers 04-100, W.E. Upjohn Institute for Employment Research.
    2. Anita Yadavalli & Jim Landers, 2017. "Tax Increment Financing: A Propensity Score Approach," Economic Development Quarterly, , vol. 31(4), pages 312-325, November.
    3. Darin Wohlgemuth & Maureen Kilkenny, 1998. "Firm Relocation Threats and Copy Cat Costs," International Regional Science Review, , vol. 21(2), pages 139-162, August.
    4. George A. Erickcek & Hannah McKinney, 2006. "“Small Cities Blues:†Looking for Growth Factors in Small and Medium-Sized Cities," Economic Development Quarterly, , vol. 20(3), pages 232-258, August.
    5. Robert T. Greenbaum & Jim Landers, 2014. "The Tiff Over TIF: A Review of the Literature Examining the Effectiveness of the Tax Increment Financing," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(3), pages 655-674, September.
    6. Robert W. Wassmer & John E. Anderson, 2001. "Bidding for Business: New Evidence on the Effect of Locally Offered Economic Development Incentives in a Metropolitan Area," Economic Development Quarterly, , vol. 15(2), pages 132-148, May.
    7. Czurylo, Todd, 2023. "The effect of tax increment financing districts on job creation in Chicago," Journal of Urban Economics, Elsevier, vol. 134(C).
    8. Joyce Y. Man & Mark S. Rosentraub, 1998. "Tax Increment Financing: Municipal Adoption and Effects On Property Value Growth," Public Finance Review, , vol. 26(6), pages 523-547, November.
    9. Thierry Madiès, 1997. "Concurrence fiscale et intercommunalité," Revue de l'OFCE, Programme National Persée, vol. 63(1), pages 195-228.
    10. Joyce Y. Man, 1999. "Fiscal Pressure, Tax Competition and the Adoption of Tax Increment Financing," Urban Studies, Urban Studies Journal Limited, vol. 36(7), pages 1151-1167, June.
    11. Albert Solé Ollé & Elisabet Viladecans Marsal, "undated". "Creación de empleo e impuestos municipales: evidencia empírica con datos de panel," Studies on the Spanish Economy 102, FEDEA.
    12. Terry F. Buss, 2001. "The Effect of State Tax Incentives on Economic Growth and Firm Location Decisions: An Overview of the Literature," Economic Development Quarterly, , vol. 15(1), pages 90-105, February.
    13. Gary Sands & Laura A. Reese & Heather L. Khan, 2006. "Implementing Tax Abatements in Michigan: A Study of Best Practices," Economic Development Quarterly, , vol. 20(1), pages 44-58, February.

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