Top ten points about business incentives in my book

Although the main focus of my book is early childhood programs, I also extensively discuss business incentives.  Even for those interested primarily in early childhood programs, understanding the pros and cons of business incentives is important.  Political debates over state economic development policy often advocate for expanded business incentives, even at the expense of cutback on public investments in education, including early childhood programs. Sound economic development strategy must include a judgment as to the mix of human capital investments and business incentives that will make up the strategy.

So, what are the top ten points of my book about business incentives?

  1. Well-designed business incentives can yield benefits for state economies that exceed costs.
  2. Across-the-board business tax cuts are far less-cost effective than well-designed business tax incentives.
  3. Customized business services, such as customized job training and manufacturing extension services, are far more cost-effective than even the best-designed business tax incentives.
  4.  The benefits of business incentives will vary with how they are financed, and will be lower if the business incentives require large cuts in public services.
  5. Business incentives are more effective if they target expansion by export-based businesses.
  6. The benefits of business incentives depend greatly on whether state residents get the created jobs, and what wages those jobs pay.
  7. Business incentives’ benefits are more front-loaded than the benefits of early childhood programs.
  8. Business incentives have reduced local benefit in local economies that already have healthy job growth.
  9. Because most of a state’s benefits from attracting jobs are offset by losses to other states, the national benefits of business incentives are only one-fifth of the own-state benefits.
  10. The European Union provides a useful model of how the U.S. federal government might regulate state use of business incentives.

About timbartik

Tim Bartik is a senior economist at the Upjohn Institute for Employment Research, a non-profit and non-partisan research organization in Kalamazoo, Michigan. His research specializes in state and local economic development policies and local labor markets.
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