Evaluating State and Local Business Incentives

Bibliographic Data

ID4029619
AuthorsCailin Slattery (Cailin Slattery is Assistant Professor of Economics, Columbia Business School, New York, New York.), Owen Zidar (Owen Zidar is Associate Professor of Economics and Public Affairs, Woodrow Wilson School of Public and International Affairs, Princeton University, Princeton, New Jersey, and a Faculty Research Associate, National Bureau of Economic Research, Cambridge, Massachusetts. .)
Year2020
Volume34
Issue2
Pages90-118
Publication date2020-05-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Journal of Economic Perspectives (JOURNAL)
Journal identifiersISSN: 0895-3309 • E-ISSN: 1944-7965
PublisherAmerican Economic Association (PUBLISHER • US)
DOI10.1257/jep.34.2.90
OpenAlexW2996965803
LanguageEN
Citations received33
References cited14

This essay describes and evaluates state and local business tax incentives in the United States. In 2014, states spent between $5 and $216 per capita on incentives for firms in the form of firm-specific subsidies and general tax credits, which mostly target investment, job creation, and research and development. States with higher per capita incentives tend to have higher state corporate tax rates. Recipients of firm-specific incentives are usually large establishments in manufacturing, technology, and high-skilled service industries, and the average discretionary subsidy is $178M for 1,500 promised jobs. Firms tend to accept subsidy deals from places that are richer, larger, and more urban than the average county, and poor places provide larger incentives and spend more per job. Comparing winning and runner-up locations for each deal, we find that average employment within the three-digit industry of the deal increases by roughly 1,500 jobs. While we find some evidence of direct employment gains from attracting a firm, we do not find strong evidence that firm-specific tax incentives increase broader economic growth at the state and local level

Business · Economics · Incentive · Labour economics · Market economy · Per capita · Per capita income · Public economics · Subsidy · Tax credit · Tax incentive · Fiscal Policy and Economic Growth · Local Government Finance and Decentralization · Regional Economics and Spatial Analysis

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