KALAMAZOO, Mich.-- Local and state policymakers push economic development incentives to spur job creation and economic wealth. The outstanding question is, "do these various types of financial incentives--tax credits, abatements, grants, and others--work?" The selected research papers in the May issue of Economic Development Quarterly (EDQ) focus on estimating the effect of local and state financial incentives in shaping business location decisions.
In his introduction to the special issue, EDQ coeditor and Upjohn Institute Senior Economist Tim Bartik summarizes what we knew before and what we now know due to the findings and policy implications of the research. Bartik also offers suggestions on reforming business incentive policy and discusses where additional research is specifically needed.
Bartik is well known for his work on economic development and financial business incentives, including research developing a unique comprehensive database on economic development incentive programs for most of the United States. His Panel Database on Incentives and Taxes (PDIT) and the Upjohn Institute's WholeData Establishment and Employment database were made available to researchers for this special issue.
"Incentives research needs to get more specific: What incentives work best for what industries in what type of local economy?" writes Bartik. "Researchers have produced evidence that simply expanding incentives does not work well enough to justify the added incentive costs, and that many state and local economies would be better off cutting back on overall incentives. But policy makers legitimately want to know what DOES work to create jobs, if our current incentive practices do not work well."