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Interstate competition for economic development has led many states to adopt targeted economic development incentive programs known as deal-closing funds. Deal-closing funds allow state officials to provide discretionary cash grants to select businesses to attract and retain economic development projects. However, whether these targeted business subsidies increase prosperity in the local economy remains unclear. The authors use evidence from Arkansas’s Quick Action Closing Fund to analyze how effective deal-closing funds are at increasing incomes and decreasing poverty. Specifically, the causal effects of the Quick Action Closing Fund on Arkansas’s county-level per capita personal income and poverty rates are estimated using a synthetic control approach. The results largely suggest that the business subsidy program fails to increase incomes and lower poverty rates over the long term, at least at the county level. These findings should serve as a caution to policy makers who wish to improve incomes and poverty rates with targeted business subsidies.

State governments rely heavily on targeted economic-development incentives to promote economic activity. In recent years, many states have adopted targeted subsidy programs known as "deal-closing funds" to attract and retain businesses. Despite the increased use of deal-closing funds, it remains unclear whether they provide value in terms of increasing private employment and establishments. In this paper, we analyze the relationship between dealclosing funds and county-level private employment and private establishments from Arkansas's Quick Action Closing Fund (QACF). We estimate these relationships using a variety of fixed-effects and OLS techniques to measure both within-county and across-county relationships. We find little evidence to suggest that the QACF creates significant job and establishment growth. The results from this study should serve to better inform public policy across states as it relates to the use of targeted business subsidies.

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