The EFFECTS of STATE and LOCAL TAX-BASED INCENTIVES on U.S. LABOR MARKETS, 1990–2015: BOON or BOONDOGGLE?
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Clear evidence about the effectiveness of economic development incentives is limited. To bridge this research gap, this study uses the Upjohn Institute Panel Database on Incentives and Taxes (PDIT). Unemployment and employment rates are used to analyze the effectiveness of tax-based incentives. Statistical results indicate that tax incentives have a marginal impact on employment status and limited benefits to states. Only the R&D tax credit statistically significantly increases employment rates. This result supports the interpretation of economic development policies as a zero-sum game.
Abstract
Clear evidence about the effectiveness of economic development incentives is limited. To bridge this research gap, this study uses the Upjohn Institute Panel Database on Incentives and Taxes (PDIT). Unemployment and employment rates are used to analyze the effectiveness of tax-based incentives. Statistical results indicate that tax incentives have a marginal impact on employment status and limited benefits to states. Only the R&D tax credit statistically significantly increases employment rates. This result supports the interpretation of economic development policies as a zero-sum game.
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