Rates of Return on Municipal Subsidies to Industry

Rinehart, James R.

doi:10.2307/1055197

Cited by 18 publications

(8 citation statements)

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“…The payoff to attracting a relocating firm is potentially very high. Studies of Southern economic development programs, conducted over a decade ago, found that industrial subsidy programs yield benefit cost ratios far exceeding one, under a wide variety of conditions (Rhinehart, 1963;Rhinehart and Laird, 1972).…”

Section: Can Tax Incentives Influence the Firm Location Decision?mentioning

confidence: 99%

Chasing a Dream: The Use of Tax Abatements to Spur Urban Economic Development

Wolkoff

1985

Urban Studies

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In this paper I develop a systematic framework for assessing the effectiveness of granting tax abatements to encourage urban economic development. This approach focuses upon the abatement's effect upon the firm's decision to invest and the impact of the investment upon the community. Current policy fails to take these considerations into account adequately. I use this framework to evaluate the potential revenue gain to the City of Detroit of offering variable abatement awards, and suggest a set of proposals to improve program performance.

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Section: Can Tax Incentives Influence the Firm Location Decision?mentioning

confidence: 99%

Chasing a Dream: The Use of Tax Abatements to Spur Urban Economic Development

Wolkoff

1985

Urban Studies

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“…First, some evaluators have counted all businesses assisted and all jobs associated with those businesses as programme benefits (e.g. RINEHART, 1963;SIDOR, 1991). However, if a firm would have made the same investment decision without the subsidy, then the public funds were substituted for private investment dollars.…”

Section: Shortcomings Of Existing Evaluationsmentioning

confidence: 99%

Getting to the Bottom Line on Low-interest Loans to Business: An Evaluation of the Small Cities Economic Development Programme in Minnesota

Dewar

Hagenlocker

1996

Regional Studies

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DEWAR M. E. and HAGENLOCKER B. (1996) Getting to the bottom line on low-interest loans to business: an evaluation of the Small Cities Economic Development Programme in Minnesota, Reg. Studies 30, 41-54. American local elected officials and planners commonly use low-interest loan programmes to attempt to promote economic growth and to encourage economic activity in distressed areas, but evaluations disagree about the programmes' effectiveness. This study's method reduces overestimation of economic growth (measured by job creation) and changes the estimation of costs to correct problems of past evaluations. When the method is applied to a Minnesota loan programme, the results show the programme created jobs at a wide range of costs, but many for less than $5,000 per job. Many of the jobs paid low wages, and the programme probably lowered earnings per job in the state. Further, the programme did redistribute some jobs to distressed areas, although it did not favour such areas. DEWAR M. E. et HAGENLOCKER B. (1996) Decouvrir la verite des prets commerciaux a taux faible: une evaluation du programme de developpement economique visant les petites villes situees dans le Minnesota, Reg. Studies 30, 41-54. Aux Etats-Unis les elus et les planificateurs locaux se servent generalement des programmes de prets a taux faible afin de tenter de promouvoir la croissance economique et de stimuler l'activite economique dans les zones defavorisees, toujours est-il que les evaluations ne concordent pas sur l'efficacite des programmes. La methode employee dans cette etude reduit la surestimation de la croissance economique (mesuree en termes de la creation d'emplois) et modifie l'estimation des couts pour corriger les problemes des evaluations anterieures. Une fois que la methode se voit appliquer au programme de prets dans le Minnesota, les resultats laissent voir que le programme a cree des emplois a salaires variables, dont beaucoup a moins de $5,000 par emploi. Beaucoup des emplois etaient faiblement remuneres et il est probable que le programme a fini par baisser les gains par emploi dans l'etat. En outre, le programme a reussi a redistribuer quelques emplois aux zones defavorisees bien qu'il n'ait pas favorise de telles zones. DEWAR M. E. und HAGENLOCKER B. (1996) Das Fazit von Niedrigzinsdarlehen an die Geschaftswelt: eine Einschatzung des Wirtschaftsentwicklungsprogramms in Kleinstădten Minnesotas, Reg. Studies 30, 41-54. Amerikanische, demokratisch gewahlte Ortsbehorden und Planer bedienen sich oft Programmen mit Niedrigzinzdarlehen, wenn sie versuchen, dem Wirtschaftswachstum zu grosserem Erfolg zu verhelfen, und wirtschaftliche Tatigkeit in Notstandsgebieten zu fordern, aber Einschatzungen der Programme sind sich uber ihre Wirksamkeit nicht einig. Diese Studie geht die Frage durch Herabsetzen der Uberschatzung des Wortschaftswachstums an, und andert die Schatzung der Kosten ab, um die Probleme fruherer Einschatzungen zu korrigieren. Bei Anwendung dieser Methode auf das Darlehensprogramm in Minnesota zeigen die Ergebnisse, das...

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“…Costs include lost tax revenue, increased service demands, added pollution or congestion, the opportunity cost of alternative investments, the loss of new jobs to commuters, and the loss of jobs to local residents who previously commuted out (Cornia, Testa, and Stocker 1978;Rinehart 1963). The generally accepted benefits include increased employment, ultimate gain in property tax revenues, encouraged business expansion in non-abated areas, and greater demand for the services and products of existing firms.…”

Section: The Efficiency Of Tax Abatementsmentioning

confidence: 99%

“…The generally accepted benefits include increased employment, ultimate gain in property tax revenues, encouraged business expansion in non-abated areas, and greater demand for the services and products of existing firms. Rinehart (1963) calculated the cost of attracting an industrial plant and the benefit of increased employment for twenty-two subsidized firms in ten southern communities. Costs include lost tax revenue, increased service demands, added pollution or congestion, the opportunity cost of alternative investments, the loss of new jobs to commuters, and the loss of jobs to local residents who previously commuted out (Cornia, Testa, and Stocker 1978;Rinehart 1963).…”

Section: The Efficiency Of Tax Abatementsmentioning

confidence: 99%

Tax Abatements—Revenue or Expense?

Peckol

1988

Journal of Planning Literature

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Rates of Return on Municipal Subsidies to Industry

Cited by 18 publications

References 0 publications

Chasing a Dream: The Use of Tax Abatements to Spur Urban Economic Development

Chasing a Dream: The Use of Tax Abatements to Spur Urban Economic Development

Getting to the Bottom Line on Low-interest Loans to Business: An Evaluation of the Small Cities Economic Development Programme in Minnesota

Tax Abatements—Revenue or Expense?

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