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Incentives to Pander

Author

Listed:
  • Jensen,Nathan M.
  • Malesky,Edmund J.

Abstract

Policies targeting individual companies for economic development incentives, such as tax holidays and abatements, are generally seen as inefficient, economically costly, and distortionary. Despite this evidence, politicians still choose to use these policies to claim credit for attracting investment. Thus, while fiscal incentives are economically inefficient, they pose an effective pandering strategy for politicians. Using original surveys of voters in the United States, Canada and the United Kingdom, as well as data on incentive use by politicians in the US, Vietnam and Russia, this book provides compelling evidence for the use of fiscal incentives for political gain and shows how such pandering appears to be associated with growing economic inequality. As national and subnational governments surrender valuable tax revenue to attract businesses in the vain hope of long-term economic growth, they are left with fiscal shortfalls that have been filled through regressive sales taxes, police fines and penalties, and cuts to public education.

Suggested Citation

  • Jensen,Nathan M. & Malesky,Edmund J., 2019. "Incentives to Pander," Cambridge Books, Cambridge University Press, number 9781108408530, October.
  • Handle: RePEc:cup:cbooks:9781108408530
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    Cited by:

    1. Cailin Slattery & Owen Zidar, 2020. "Evaluating State and Local Business Incentives," Journal of Economic Perspectives, American Economic Association, vol. 34(2), pages 90-118, Spring.
    2. Mitchell, Matt & Farren, Michael & Gonzalez, Olivia & Horpedahl, Jeremy, 2019. "The Economics of a Targeted Economic Development Subsidy," Annals of Computational Economics, George Mason University, Mercatus Center, November.
    3. Timothy J. Bartik, 2020. "Introduction to Special Issue: Learning More About Incentives," Economic Development Quarterly, , vol. 34(2), pages 95-100, May.
    4. Timothy J. Bartik, 2020. "Smart Place‐Based Policies Can Improve Local Labor Markets," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(3), pages 844-851, June.
    5. Patel, Pankaj C. & Ojha, Divesh & Naskar, Shankar, 2022. "The effect of firm efficiency on firm performance: Evidence from the Domestic Production Activities Deduction Act," International Journal of Production Economics, Elsevier, vol. 253(C).
    6. Jia Wang & Weici Yuan & Cynthia Rogers, 2020. "Economic Development Incentives: What Can We Learn From Policy Regime Changes?," Economic Development Quarterly, , vol. 34(2), pages 116-125, May.
    7. Timothy J. Bartik, 2020. "Using Place-Based Jobs Policies to Help Distressed Communities," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 99-127, Summer.
    8. Sarah Bauerle Danzman & Alexander Slaski, 2022. "Incentivizing embedded investment: Evidence from patterns of foreign direct investment in Latin America," The Review of International Organizations, Springer, vol. 17(1), pages 63-87, January.
    9. Daniel Finke, 2020. "At loggerheads over state aid: Why the Commission rejects aid and governments comply," European Union Politics, , vol. 21(3), pages 474-496, September.
    10. Nathan M. Jensen, 2018. "Bargaining and the effectiveness of economic development incentives: an evaluation of the Texas chapter 313 program," Public Choice, Springer, vol. 177(1), pages 29-51, October.
    11. Vortherms, Samantha A., 2019. "Disaggregating China’s local political budget cycles: “Righting” the U," World Development, Elsevier, vol. 114(C), pages 95-109.
    12. Richard Funderburg & Joshua Drucker & David Merriman & Rachel Weber, 2021. "Is Tax Competition Strategic? Spatial Distributions of Business Property Tax Abatements in the Chicago Suburbs," Economic Development Quarterly, , vol. 35(1), pages 66-83, February.
    13. Cailin Slattery & Owen Zidar, 2020. "Evaluating State and Local Business Tax Incentives," Working Papers 261, Princeton University, Department of Economics, Center for Economic Policy Studies..

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