Lights, Camera, but No Action? Tax and Economic Development Lessons From State Motion Picture Incentive Programs

Abstract

Despite mixed results, state government use of targeted economic development programs has escalated. This study evaluates the impact of motion picture incentive programs, an array of tax incentives employed by over 40 states to entice film and television productions out of California and New York, on labor and economic conditions from 1998 through 2013. Results suggest that sales and lodging tax waivers had no effect on any of four different economic indicators. Transferable tax credits had a small, sustained effect on motion picture employment levels but no effect on wages. Refundable tax credits had no employment effect and only a temporary wage effect. Neither credit affected gross state product or motion picture industry concentration. Incentive spending also had no influence. These findings demonstrate the heterogeneous impacts of different incentives offered under a single program and should inform future economic development policy design.

Do Movie Production Incentives Generate Economic Development?

“…This analysis finds no link between incentives that promote in-state filming and states' economic growth or level. The findings are not surprising given previous estimates of small and nonrobust effects of MPIs on the film industry (Button 2019;Owens and Rennhoff Forthcoming;Swenson 2017;Thom 2018). The empirical findings are also consistent with reports by state economic development agencies that have estimated weak financial returns to their film incentive programs (Christopherson and Rightor 2010).…”

“…A few recent studies have analyzed the direct effect of MPIs on the film industry. Thom () uses panel data to examine the impact of MPIs and finds incentives to be associated with little to no increase in film industry employment; however, MPIs may have generated a small temporary wage boost for some employees. Tax credits were not associated with changes in output of the film sector or the concentration of the industry.…”

“…A few recent studies have analyzed the direct effect of MPIs on the film industry. Thom (2018) uses panel data to examine the impact of MPIs 5. In reviewing the academic literature on MPIs, I identified some conflicts in MPI designations across sources.…”

Assessing disproportionality: indexes of policy responses to the 2007–2008 banking crisis

“…Such correspondence is a demonstration of proportionality. This approach was used in assessing the policy of housing shortage in Hong Honk (Or 2015), while the lack of statistical correlation between changes in industry-specific labor and economic measures and US states' tax incentives for motion picture industry attested the existence of a policy bubble (Thom 2016).…”

Corporations, Associations and the State: The International Subsidy System for Film

“…Others argue that subsidization has little effect on location choice for production (Lynch, 1996) and is thus simply paying for production that already exists. At best, positive outcomes from incentives and subsidies tend to be fleeting, either as the market catches up to the adjustment (Thom, 2016), or as competing programs crowd out initial gains of early adopters (Thom and An, 2017). The mobility and temporality of these projects, as well as the expanse of the subsidization scheme, means film subsidization should be one of the least useful industries to subsidize.…”