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Incentive Solutions

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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.

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  • Timothy J. Bartik, 2004. "Incentive Solutions," Upjohn Working Papers 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.
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    1. 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.
    2. 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.
    3. 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.
    4. Timothy J. Bartik, "undated". "What Should the Federal Government Be Doing About Urban Economic Development?," Upjohn Working Papers tjb1994c, W.E. Upjohn Institute for Employment Research.
    5. 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.
    6. 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.
    7. 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.
    8. William H. Oakland & William A. Testa, 1996. "State-local business taxation and the benefits principle," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 20(Jan), pages 2-19.
    9. Charles S. Colgan, 1995. "Brave New World: International Regulation of Subsidies and the Future of State and Local Economic Development Programs," Economic Development Quarterly, , vol. 9(2), pages 107-118, May.
    10. 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.
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    Cited by:

    1. Mark Drabenstott, 2006. "Rethinking federal policy for regional economic development," Economic Review, Federal Reserve Bank of Kansas City, vol. 91(Q I), pages 115-142.

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    More about this item

    Keywords

    economic; development; incentives; local; regional; Bartik; solutions;
    All these keywords.

    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

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