Hostname: page-component-cd9895bd7-hc48f Total loading time: 0 Render date: 2024-12-21T17:09:34.498Z Has data issue: false hasContentIssue false
  • English
  • Français

Job creation and firm-specific location incentives

Published online by Cambridge University Press:  29 March 2016

Nathan M. Jensen
Nathan M. Jensen*
Affiliation:
Department of International Business, George Washington University, USA E-mail: natemjensen@gwu.edu
Get access Rights & Permissions [Opens in a new window]

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.

Keywords

incentivesjob creationlocal economic development
Type
Research Article
Information
Journal of Public Policy , Volume 37 , Supplement 1 , March 2017 , pp. 85 - 112
Copyright
© Cambridge University Press, 2016 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Bartik, T. J. (2005) Solving the Problems of Economic Development Incentives. Growth and Change 36(2): 139–166.Google Scholar
Baruch, Y. and Holtom, B. C. (2008) Survey Response Rate Levels and Trends in Organizational Research. Human Relations 61(8): 1139–1160.Google Scholar
Bishop, M. W. (2012) Border War: Kansas City. New York Times, 1 December, http://www.nytimes.com/video/business/100000001832941/border-war.html (accessed 19 March 2016).Google Scholar
Blomstrom, M. and Kokko, A. (2003) The Economics of Foreign Direct Investment Incentives. National Bureau of Economic Research Working Paper #9489.CrossRefGoogle Scholar
Bobonis, G. J. and Shatz, H. J. (2007) Agglomeration, Adjustment, and State Policies in the Location of Foreign Direct Investment in the United States. The Review of Economics and Statistics 89(1): 30–43.CrossRefGoogle Scholar
Bollinger, C. R. and Ihlanfeldt, K. R. (2003) The Intraurban Spatial Distribution of Employment: Which Government Interventions Make a Difference? Journal of Urban Economics 53: 396–412.CrossRefGoogle Scholar
Bondonio, D. and Greenbaum, R. T. (2007) Do Local Tax Incentives Affect Economic Growth? What Mean Impacts Miss in the Analysis of Enterprise Zone Policies. Regional Science and Urban Economics 37: 121–136.Google Scholar
Bronzini, R. and Guido de Blasio, G. (2006) Evaluating the Impact of Investment Incentives: The Case of Italy’s Law 488/1992. Journal of Urban Economics 60(2): 327–349.CrossRefGoogle Scholar
Buettner, T. and Ruf, M. (2007) Tax Incentives and the Location of FDI: Evidence from a Panel of German Multinationals. International Tax and Public Finance 14(2): 151–164.CrossRefGoogle Scholar
Buss, T. F. (2001) The Effect of State Tax Incentives on Economic Growth and Firm Location Decisions: An Overview of the Literature. Economic Development Quarterly 15(1): 90–105.Google Scholar
Busso, M., Gregory, J. and Kline, P. M. (2010) Assessing the Incidence and Efficiency of a Prominent Place Based Policy. Working Paper No. 16096, National Bureau of Economic Research. http://www.nber.org/papers/w16096 Google Scholar
Chatterji, A., Findley, M., Jensen, N. M., Meier, S. and Nielson, D. (2016) Field Experiments in Strategy. Strategic Management Journal 37(1): 116–132.Google Scholar
Cycyota, C. and Harrison, D. A. (2006) What (Not) to Expect When Surveying Executives. A Meta-Analysis of Top Manager Response Rates and Techniques Over Time. Organizational Research Methods 9(6): 133–160.Google Scholar
Easson, A. (2004) Tax Incentives for Foreign Direct Investment. The Hague: Kluwer Law International.Google Scholar
Faulk, D. (2002) Do State Economic Development Incentives Create Jobs? An Analysis of State Employment Tax Credits. National Tax Journal 55(2): 263–280.Google Scholar
Forbes (2015) The Best States for Business, http://www.forbes.com/places/ks/ (accessed 20 March 2016).Google Scholar
Fox, W. F. and Murray, M. N. (2004) Do Economic Effects Justify the Use of Fiscal Incentives? Southern Economic Journal 71(1): 78–92.Google Scholar
Gabe, T. and Kraybill, D. (2002) The Effect of State Economic Development Incentives on Employment Growth of Establishments. Journal of Regional Science 42(4): 703–730.CrossRefGoogle Scholar
Gattiker, U. E. (1995) Firm and Taxpayer Returns from Training of Semiskilled Employees. Academy of Management Journal 38(3): 1152–1173.CrossRefGoogle Scholar
Greenbaum, R. T. and Landers, J. (2009) Why are State Policy Makers Still Proponents of Enterprise Zones? What Explains Their Actions in the Face of a Preponderance of the Research? International Regional Science Review 32(4): 466–479.CrossRefGoogle Scholar
Greenstone, M. and Moretti, E. (2003) Bidding for Industrial Plants: Does Winning a “Million Dollar Plant” Increase Welfare? NBER Working Paper No. 9844, NBER. http://www.nber.org/papers/w9844 Google Scholar
Gual, J. (1995) The Three Common Policies: An Economic Analysis. In Buigues P., Jacquemin A. and Sapir A. (eds.), European Policies on Competition, Trade and Industry. Conflict and Complementarities. Cheltenham: Edward Elgar Publishing, 3–48.Google Scholar
Hainmueller, J. (2012) Entropy Balancing for Causal Effects: A Multivariate Reweighting Method to Produce Balanced Samples in Observational Studies. Political Analysis 20(1): 25–46.Google Scholar
Hainmueller, J. and Xu, Y. (2013) Ebalance: A Stata Package for Entropy Balancing. Journal of Statistical Software 54(7): 1–18.Google Scholar
Head, K. C., Ries, J. C. and Swenson, D. L. (1999) Attracting Foreign Manufacturing: Investment Promotion and Agglomeration. Regional Science and Urban Economics 29: 197–218.Google Scholar
Hicks, M. J. and LaFaive, M. (2011) The Influence of Targeted Economic Development Tax Incentives on County Economic Growth: Evidence from Michigan’s MEGA Credits. Economic Development Quarterly 25(2): 193–205.Google Scholar
Iacus, S. M., King, G. and Porro, G. (2012) Causal Inference Without Balance Checking: Coarsened Exact Matching. Political Analysis 1(20): 1–24.Google Scholar
James, S. (2009) Tax and non-tax incentives and investments: evidence and policy implications." FIAS, The World Bank Group Working Paper.CrossRefGoogle Scholar
Jensen, N. M. (2003) Democratic Governance and Multinational Corporations: Political Regimes and Inflows of Foreign Direct Investment. International Organization 57(3): 587–616.Google Scholar
Jensen, N. M. (2006) Nation-States and the Multinational Corporation: A Political Economy of Foreign Direct Investment. Princeton NJ: Princeton University Press.Google Scholar
Jensen, N. M., Malesky, E. and Walsh, M. (2015) Competing for Global Capital or Local Voters? The Politics of Business Location Incentives. Public Choice 164(3): 331–356.Google Scholar
Klein, P. and Moretti, E. (2013) People, Places and Public Policy: Some Simple Welfare Economics of Local Economic Development Programs. National Bureau of Economic Research Working Paper No. 19659, National Bureau of Economic Research. http://www.nber.org/papers/w19659 Google Scholar
Klemm, A. and Van Parys, S. (2012) Empirical Evidence on the Effects of Tax Incentives. International Tax and Public Finance 19(3): 393–423.Google Scholar
Lazzarini, S. G. (2015) Strategizing by the Government: Can Industrial Policy Create Firm-Level Competitive Advantage. Strategic Management Journal 36: 97–112.Google Scholar
Legislative Division of Post Audit (2013) Economic Development: Determining which Economic Development Tools are Most Important and Effective in Promoting Job Creation and Economic Growth in Kansas. Part 1. Performance Audit Report, Legislative Division of Post Audit.Google Scholar
Legislative Division of Post Audit (2014) Economic Development: Determining Which Economic Development Tools are Most Important and Effective in Promoting Job Creation and Economic Growth in Kansas. Part 3.Google Scholar
LeRoy, G. (2005) The Great American Job Scam: Corporate Tax Dodging and the Myth of Job Creation. San Francisco, CA: Berrett-Koehler Publishers.Google Scholar
Li, Q. (2006) Democracy, Autocracy and Tax Incentives to Foreign Direct Investors. A Cross-National Analysis. Journal of Politics 68(1): 62–74.Google Scholar
Mattera, P., Cafcas, T., McIlvaine, L., Seifter, A. and Tarczynska, K. (2012b) Money-Back Guarantees for Taxpayers: Clawbacks and Other Enforcement Safeguards in State Economic Development Subsidy Programs, http://www.goodjobsfirst.org/moneyback Google Scholar
Mattera, P., Tarczynska, K. and LeRoy, G. (2013) Megadeals: The Largest Economic Development Subsidy Packages Ever Awarded by State and Local Governments in the United States, http://www.goodjobsfirst.org/sites/default/files/docs/pdf/megadeals_report.pdf.Google Scholar
Mattera, P., Tarczynska, K., Mcllvaine, L., Cafcas, T. and LeRoy, G. (2012a) Paying Taxes to Their Bosses: How a Growing Number of States Subsidize Companies with the Withholding Taxes of Workers, http://www.goodjobsfirst.org/sites/default/files/docs/pdf/taxestotheboss.pdf Google Scholar
Moody’s (2013) Moody’s Investor Service. Rating Action: Moody’s Downgrades Kansas Department of Commerce IMPACT Bonds to A3 to Aa3, https://www.moodys.com/research/Moodys-downgrades-Kansas-Department-of-Commerce-IMPACT-bonds-to-A3--PR_276575 Google Scholar
Morisset, J. and Pirnia, N. (1999) How Tax Policy and Incentives Affect Foreign Direct Investment. World Bank Policy Research. Working paper No. 2509.Google Scholar
Neumark, D. and Kolko, J. (2010) Do Enterprise Zones Create Jobs? Evidence from California’s Enterprise Zone Program. Journal of Urban Economics 68: 1–19.Google Scholar
Neumark, D., Wall, B. and Zhang, J. (2011) Do Small Businesses Create More Jobs? New Evidence from the National Establishment Time Series. Review of Economics and Statistics 93(1): 16–29.Google Scholar
Patrick, C. E. (2014) Does Increasing Available Non-Tax Economic Development Incentives Result in More Jobs? National Tax Journal 67(2): 351–386.Google Scholar
Peters, A. and Fisher, P. (2004) The Failures of Economic Development Incentives. Journal of the American Planning Association 70(1): 27–37.Google Scholar
Podsakoff, P. M. and Organ, D. W. (1986) Self-Reports in Organizational Research: Problems and Prospects. Journal of Management 12(4): 531–544.Google Scholar
Reese, L. A. (2014) The Alchemy of Local Economic Development. Economic Development Quarterly 28(3): 206–219.Google Scholar
Rodríguez-Pose, A. and Arbix, G. (2001) Strategies of Waste: Bidding Wars in the Brazilian Automobile Sector. International Journal of Urban and Regional Research 25(1): 134–154.Google Scholar
Taxes Foundation (2015) 2015 State Business Climate Tax Index, http://taxfoundation.org/article/2015-state-business-tax-climate-index Google Scholar
Walker, R. and Greenstreet, D. (1991) The Effect of Government Incentives and Assistance on Location and Job Growth in Manufacturing. Regional Studies 25: 13–30.Google Scholar
Wassmer, R. W. and Anderson, J. E. (2001) Bidding for Business: New Evidence on the Effect of Locally Offered Economic Development Incentives in a Metropolitan Area. Economic Development Quarterly 15: 132–148.CrossRefGoogle Scholar
Wells, L. T., Allen, N. J., Morisset, J. and Pirnia, N. (2001) Using Tax Incentives to Compete for Foreign Investment: Are They Worth the Costs? FIAS Occasional Paper No. 15, Washington, DC: The International Finance Corporation and the World Bank.Google Scholar
Zee, H. H., Stotsly, J. G. and Ley, E. (2002) Tax Incentives for Business Investment: A Primer for Policy Makers in Developing Countries. World Development 30(9): 1497–1516.CrossRefGoogle Scholar
Supplementary material: File

Jensen supplementary material

Appendix

Download Jensen supplementary material(File)
File 54.3 KB