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New report explores whether economic development incentives are worth the cost

Posted: March 2, 2017

Our Technical Advisory Committee Chair, Paul Gottlieb, brought to our attention a hot topic currently being debated by economists: whether economic development incentives designed to attract businesses are worth their costs to taxpayers.

A new report, authored by Timothy Bartik of the W.E. Upjohn Institute, sheds light on the issue. Using data from 1990 to 2015, Bartik built a database that estimates "marginal business taxes and business incentives for 47 cities in 33 states for 45 industries for 26 years. The 33 states compose 92 percent of U.S. GDP, and the 45 industries compose 91 percent of U.S. labor compensation." (source)

The discussion about economic development incentives isn't limited to the halls of academia. On March 16, the Wall Street Journal ran a story titled, "U.S. Cities Battle Each Other for Jobs With $45 Billion in Incentives." (It seems to be available without a paywall here.)