Upjohn Institute Working Paper No. 04-99

**Published Version**

Growth and Change 36 (Spring 2005): 139-166. Under title Solving the Problems of Economic Development Incentives
In Reining in the Competition for Capital, Ann Markusen, editor. Kalamazoo, MI: W.E. Upjohn Institute, 2007, pp.103-140. Under title Solving the Problems of Economic Development Incentives




This paper reviews the research literature relevant to economic development incentives provided by state and local governments, and recommends reforms in these incentives. I argue that the main problem with current incentive policies is that state and local governments often provide incentives that are not in the best interest of that state or local area, for example that are excessively costly per job created, or that provide jobs that do not improve the job opportunities of local residents. I suggest that reforms should be "bottom-up" rather than "top-down." Regulation of incentives by the federal government, or by international trade treaties, may prevent both desirable and undesirable incentives. "Bottom-up" reforms would include more information on incentive offers, a budget constraint on the volume of incentives, stronger standards for job quality, accessibility, and performance in incentives, and better benefit-cost analyses of incentives.

Issue Date

February 2004


Prepared for conference presentation "Reining in the Competition for Capital" at the Humphrey Institute, University of Minnesota, February 27, 2004

Subject Areas

ECONOMIC DEVELOPMENT; Regional policy and planning; Business and tax incentives




Bartik, Timothy J. 2004. "Incentive Solutions." Upjohn Institute Working Paper No. 04-99. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research.