Do Targeted Business Subsidies Improve Income and Reduce Poverty? A Synthetic Control Approach

Abstract

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.

How do Agricultural Subsidies affect the Income of Food- producing Household: a Mediated Moderation Model

“…Existing studies have primarily examined the impact of income distribution effects of agricultural subsidies on rural household income in the context of the human-land contradiction and the prevalent food security problem in China. Many research results have shown that agricultural subsidies, which serve as a crucial form of nancial support for agriculture in China, can directly increase rural household income while reducing production input costs to increase net farm income [47][48][49][50].While studies have demonstrated the positive effects of agricultural subsidies on rural household income, most of them have overlooked the pathways through which agricultural subsidies affect rural household income and the moderating variable of operation scale. Therefore, this paper introduces agricultural mechanization levels and operation scale to explore the internal mechanisms of agricultural subsidies on rural household income.…”

Taxes and Economic Development: An Update on the State of the Economics Literature

“…30. Bundrick and Yuan (2019) examined a nontax, discretionary grant fund used to attract businesses to Arkansas using a synthetic control approach.…”

The Impact of New Jersey's Urban Enterprise Zones on Local Employment: A Synthetic Control Approach

“…There are several examples of the SCM used to empirically evaluate the effect of a policy on employment (Castillo et al, 2017; Munasib & Rickman, 2015). Bundrick and Yuan (2019) used SCM to evaluate the impact of an Arkansas targeted business subsidy program on per capita income and poverty at the county level. Additionally, Chaurey (2017) and Gobillon and Magnac (2016) used SCM to evaluate place-based policies in India and France, respectively.…”