Do local pols use perks to take false credit for economic development?
When ConAgra moved to Chicago, its CEO admitted it had nothing to do with the city’s incentives (although he took them anyway). On his academic blog, UT Austin Professor Nathan Jensen calls handouts like these, which Silicon Valley cities routinely give out, “redundant, expensive and ineffective.” Why, after all, should a company get $62 million just to move four miles?
YOU DON'T NEED THE DOT DOT DOTS. JUST START IT; We argue that politicians use incentives to take credit for economic development and this leads to the overuse of incentives.
My big criticism of incentives [is] they are often redundant. Incentives are tax breaks or grants to induce firms to relocate, expand or stay put. But academic research shows that the majority of firms would have made the same decision (relocate, expand, or stay) even without incentives. In these cases, incentives are just a transfer of taxpayer funded benefits to firms for no new economic activity.
Two stories this week reiterate this redundancy.
First, ConAgra chose to relocate from Nebraska to Chicago despite Chicago offering less than half of the economic development incentives. A company taking a smaller incentive offer isn’t a smoking gun that incentives weren’t effective. More telling are the CEOs statements saying that these were not pivotal in the investment location decision.
“The decision to move headquarters was solely based on the strategic needs of our business and was not a city-vs-city exercise.”
Second, Marriott international moved its headquarters to Bethesda, MD with $62 million in economic development incentives. This is a big deal and the new economic activity for a corporate location could have a major economic development impact. Where did they move from? From four miles down the road in Maryland.
Read the whole thing here.
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