Job creation and firm-specific location incentives

ArticleinJournal of Public Policy -1(01):1-28 · March 2016with 141 Reads 
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Abstract
Government economic development programmes provide opportunities for firms to leverage financial incentives for business expansion and relocation. This article examines the ability of these incentives to promote employment. Using establishment-level data from the state of Kansas as well as original firm-level survey data, I evaluate the effectiveness of financial incentives in creating jobs through recipient firms. My findings from the establishment-level data indicate that incentive programmes have no discernable impact on firm expansion, measured by job creation. In addition, the survey data suggest that incentive recipients highly recommend this programme to other firms, but few firms actually increased their employment in Kansas because of these incentives; similarly, very few firms would have left the state if they had not benefited from this programme. Thus, incentives have little impact on the relocation or expansion decisions of firms.

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  • ... One approach to ruling out systematic differences that might influence outcomes is to identify a control group of firms that did not receive incentives but is similar in other ways to firms that received them. Because of data privacy issues, most studies have been unable to construct a comparable control group of firms that did not receive incentives, with a few exceptions (e.g., Donegan, Lester, & Lowe, 2018;Jensen, 2017). 2 Instead, evaluations of the outcomes of economic development programs tend to default to the places where subsidized businesses operate. ...
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  • ... 17. See Jensen (2017), Li (2006), Pinto and Pinto (2008), and Vernon (1971) for discussions of states using incentives to attract FDI. 18. ...
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