Policy Paper No. 2020-021
Place-based policies that increase jobs in local labor markets can have large benefits, but current policies need reforms. Local job growth can have large benefits by increasing local employment-to-population ratios (employment rates). These employment rate benefits are larger if jobs are created in local labor markets that are distressed, or if new jobs are matched to the local nonemployed. Current place-based policies are mostly business tax incentives, provided by state and local governments. These incentives are costly per job actually created by the incentive. More cost-effective job creation are public services to businesses, such as customized job training or business advice or infrastructure. Reforms to place-based policies should increase benefits by targeting distressed areas and the non-employed; and lower costs by placing less emphasis on incentives, and more emphasis on public services to business. The federal government can encourage reforms by capping incentives, and by providing flexible grants for job creation in distressed areas.
Upjohn project #58505
LABOR MARKET ISSUES; ECONOMIC DEVELOPMENT; Regional policy and planning; Business and tax incentives
Bartik, Timothy J. 2020. "Place-Based Policy: An Essay in Two Parts." Policy Paper No. 2020-021. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research. https://doi.org/10.17848/pol2020-021