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Authors

Timothy J. Bartik, W.E. Upjohn Institute for Employment ResearchFollow

Upjohn Author ORCID Identifier

https://orcid.org/0000-0002-6238-8181

Issue Date

November 2023

Abstract

This paper estimates the benefits and costs of the incentive package provided to the proposed Ford battery plant in Marshall, Michigan. This project, announced in February 2023, involves a state and local business incentive package whose undiscounted value is $1.7 billion, and which is awarded to a plant that will eventually create 2,500 permanent jobs. The incentive package is analyzed using the Bartik Benefit-Cost Model of Incentives. The model’s estimates suggest that the incentive package has economic benefits whose present value is over 1.8 times the project’s incentive costs. Most of these benefits are higher earnings per capita for Michigan residents, a product of the project’s job creation and its resulting effects in boosting employment rates, real wage rates, and earnings per capita. Further analyses find that the project’s positive net benefits are mainly due to the project’s extraordinarily high multiplier, its location in a moderately distressed county, and the project’s limited effects in reducing K–12 spending. The estimates from this case study suggest that generous incentive packages for megaprojects are more likely to pass a benefit-cost test if policymakers target high-multiplier industries in distressed counties, and avoid adverse effects on K–12 education.

Series

Policy Paper No. 2023-031

DOI

10.17848/pol2023-031

Keywords

Business incentives, local labor markets, state and local economic development policies, industrial policy, benefit-cost analysis

Subject Areas

EDUCATION; K-12 Education; ECONOMIC DEVELOPMENT; Local labor markets; Regional policy and planning; Business and tax incentives; Michigan studies; Transportation and infrastructure; WORKFORCE DEVELOPMENT