Do Business Subsidies Lead to Increased Economic Activity? Evidence from Arkansas's Quick Action Closing Fund

Bundrick, Jacob; Snyder, Thomas

doi:10.2139/ssrn.3169574

Cited by 4 publications

(5 citation statements)

References 24 publications

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“…Little work has been undertaken on the specific impacts of development incentives on entrepreneurial activity, which is the primary issue our statistical tests will explore. Mitchell et al (2018) and Bundrick and Snyder (2018) provide two of the most recent reviews of the literature on incentives [3]. The former contains only one mention of the word "entrepreneur" (or any related words such as "entrepreneurial" and "entrepreneurship").…”

Section: Related Literaturementioning

confidence: 99%

“…More recently, Bundrick and Snyder (2018) examined Arkansas's Quick Action Closing Fund (QACF), a "deal-closing" fund similar to those in most other states. Using county data, they found no relationship between QACF subsidies to firms in those counties and two measures of economic activity: the level of private employment and the number of private business establishments.…”

Section: Related Literaturementioning

confidence: 99%

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Targeted state economic development incentives and entrepreneurship

Tuszynski

Stansel

2018

JEPP

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Purpose The purpose of this paper is to examine the relationship between state economic development incentives programs and entrepreneurial activity. Design/methodology/approach The authors use panel data and a fixed-effects model to examine the determinants of five measures of entrepreneurial activity. To measure state economic development incentives programs, they use a new and substantially improved data set from Bartik (2017). They also include a measure for economic freedom, the Fraser Institute’s Economic Freedom of North America index. Findings The authors find a robustly negative relationship between development incentives and patent activity. They find some evidence that incentives are negatively associated with small business establishments (<10 employees) as a percentage of total establishments but positively associated with the large business establishment (>500 employees) share. They also find evidence of a positive relationship between economic freedom and both patent activity and net business formation. Research limitations/implications The results imply that economic development incentive programs are unlikely to increase entrepreneurial activity and may decrease it. They also imply increased economic freedom (lower taxes, lower spending, and lower governmental restrictions on labor markets) may increase entrepreneurial activity. Originality/value To the authors’ knowledge, this paper provides the first examination of the relationship between development incentives and entrepreneurial activity that utilizes Bartik (2017), a new vastly improved data set of state economic development incentive programs. The paper also contributes to the literature on the relationship between economic freedom and entrepreneurial activity.

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Section: Related Literaturementioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

Targeted state economic development incentives and entrepreneurship

Tuszynski

Stansel

2018

JEPP

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“…The ever-evolving topic of business relocation and expansion decisions have been widely discussed in the literature (Stallmann and Deller, 2011;Kolko et al, 2013). For example, a recent issue of the Review of Regional Studies (volume 48, issue 1; 2018) presented multiple papers which discussed the history of providing incentives and provided insights on their efficacy from empirical recent studies (Bryne, 2017;Bundrick and Snyder, 2018;Calcagno and Hefner, 2018;Mitchell et al, 2018). These studies, and indeed much of the previous literature, find that tax incentives are not major factors in business relocation or expansion c Southern Regional Science Association 2020.…”

Section: Background and Literature Reviewmentioning

confidence: 99%

Business Climate in the Eye of the Employer

Salaghe¹,

Watson²,

Hildebrandt³

et al. 2020

Review of Regional Studies

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What constitutes a "good business climate" is often couched in monolithic and diametrically opposed terms of low taxes versus high public services. However, there is likely considerable heterogeneity across firms in their preferences for the trade-off between higher taxes and the public services they provide. Using a novel primary data set of firm expansion and relocation decisions, this analysis investigates how firms in relatively high-paying sectors express their preferences for a variety of local "business climate" attributes relative to firms in lower-paying sectors. The findings show evidence that firms in low-wage sectors view a "good business climate" differently than firms in high-wage sectors.

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“…Furthermore, he finds that when TIF is used to retain jobs, the number of reported retained jobs is negatively related to municipal employment, suggesting jobs retained as part of the TIF came at the expense of jobs elsewhere in the community. Jacob Bundrick and Thomas Snyder (2018) look at the effects of Arkansas's Quick Action Closing Fund (QACF), which allows Arkansas's governor to use funds to close deals with firms looking to locate in the state. They find that subsidies positively correlate with private employment and establishments within the county in which they are issued.…”

Section: Case Studiesmentioning

confidence: 99%

“…Most studies only take a narrow approach. Bundrick and Snyder (2018) and Byrne (2018) look at the effects of targeted economic development incentives broadly and find they do not produce the benefits intended (primarily, an increase in employment, business establishments, or both). Guo and Cheng (2018), who show that general economic development policies (i.e.…”

Section: Future Workmentioning

confidence: 99%

The Political Economy of Targeted Economic Incentives

Mitchell¹,

Sutter²,

Eastman³

2018

Review of Regional Studies

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The use of targeted economic development incentives-or selective financial and regulatory incentives to encourage particular firms to relocate or expand-has proliferated in recent decades. However, the relationship between these targeted incentives and another approach to economic development, economic freedom, has not been studied. This article reviews several new studies assessing this relationship, and provides a review of academic literature evaluating how targeted incentives affect communities as a whole, including those firms and industries not receiving subsidies from government. It concludes by discussing areas for future work.

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Do Business Subsidies Lead to Increased Economic Activity? Evidence from Arkansas's Quick Action Closing Fund

Cited by 4 publications

References 24 publications

Targeted state economic development incentives and entrepreneurship

Targeted state economic development incentives and entrepreneurship

Business Climate in the Eye of the Employer

The Political Economy of Targeted Economic Incentives

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