Are Local Economic Development Incentives Promoting Job Growth? An Empirical Case Study

40 Pages Posted: 26 Nov 2005

See all articles by Franz Fuerst

Franz Fuerst

University of Cambridge - Department of Land Economy; University of Melbourne; City University of New York - Center for Urban Research

John Mollenkopf

City University of New York - Center for Urban Research

Date Written: September 2005

Abstract

At a time when cities are competing with one another to attract or retain jobs within a globalizing economy, city governments are providing an array of financial incentives to stimulate job growth and retain existing jobs, particularly in high cost locations. This paper provides the first systematic and comprehensive analysis of datasets on economic development incentives in New York City over the last fifteen years. The evidence on job retention and creation is mixed. Although many companies do not meet their agreed-upon job targets in absolute terms, the evidence suggests that companies receiving subsidies outperform their respective industries in terms of employment growth, that is, the grow more, or decline less. We emphasize that this finding is difficult to interpret, since firms receiving incentives may not be representative of the industry as a whole. In other words, their above-average performance may simply reflect the fact that the Economic Development Corporation (EDC) selects economically promising companies within manufacturing (or other industries) when granting incentives. At the same time, it is also possible that receiving incentives helps these companies to become stronger.

Keywords: economic development incentives, job growth, manufacturing, subsidies, urban development, economic development policy

JEL Classification: H2, E62, R51

Suggested Citation

Fuerst, Franz and Mollenkopf, John, Are Local Economic Development Incentives Promoting Job Growth? An Empirical Case Study (September 2005). Available at SSRN: https://ssrn.com/abstract=854566 or http://dx.doi.org/10.2139/ssrn.854566

Franz Fuerst (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

HOME PAGE: http://www.landecon.cam.ac.uk/directory/dr-franz-fuerst

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

City University of New York - Center for Urban Research

CUNY The Graduate Center
New York, NY 10011
United States

John Mollenkopf

City University of New York - Center for Urban Research ( email )

CUNY The Graduate Center
New York, NY 10011
United States
212-642-2365 (Phone)
212-642-2642 (Fax)

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