The Distributional Effects of Million Dollar Plants

Publication Date


Grant Type

Early Career Research Award


Another way to measure effectiveness of discretionary subsidies is to study whether they increase equity. Place-based policies are one way to transfer resources to distressed regions and have the potential to create substantial welfare gains (Gaubert, Kline, and Yagan 2020). However, there is no empirical evidence on the distributional consequences of discretionary subsidies. How much do these policies improve the well-being of underemployed and low-income workers? In this project we will link a new dataset on discretionary subsidies, collected by Slattery (2020), to worker-level data from the Census Longitudinal Employer-Household Dynamics (LEHD). We then will employ the “Million Dollar Plants” strategy to answer the following research questions:

1. What kinds of workers are hired at the new plant? What is their prior employment status, occupation, location, and income? What is their age, race, and education level?

2. Are workers better off in the winning county? Are previously unemployed workers more likely to be employed in the winning county than in the runner-up? Are low-wage workers more likely to experience wage increases in the winning county than in the runner-up? How does the distribution of employment and income change in the winning county?

3. Are there spillovers to workers in other local establishments? Does increase in labor demand due to new entrant increase wages in the local area? For which occupations? For which industries? For which education levels?

4. How do these results depend on the type of subsidy deal? Do subsidy deals in certain industries have different or larger effects? Do higher cost-per-job or larger investment deals have different effects?