Economic Development Incentive Wars

Economic Development Incentive WarsState and local competition for business expansions and new plants has grown fierce.Governments are offering businesses a wider variety of incentives-not only property tax abatements, but wage subsidies, worker training, new roads, and land.Incentive packages are getting larger.Alabama's 1993 incentive package for a new Mercedes plant was $168,000 per new job.Tennessee's 1980 bid for a new Nissan plant was "only" $11,000 for each new job.How successful are these lavish incentive packages in influencing expansion and business location decisions?What are the costs and benefits that should be considered by state and local governments in designing their policies toward economic development incentives?These questions can be answered from two points of view: the perspective of a state or local government, and the national perspective. The State and Local PerspectiveResearch and case study analysis suggest the following guidelines for state and local governments to use in incentive policy deliberations.