In an effort to spur economic growth and to burnish their job-creation bona fides, policymakers at the federal, state, and local levels often dispense targeted economic development subsidies. These selective incentives include targeted tax relief, targeted regulatory relief, cash subsidies, and in-kind donations of land and other valuable goods and services. The weight of economic theory suggests that these subsidies do not work and may even depress economic activity. In this paper, we review the economic case for and against targeted economic development subsidies, using Wisconsin’s $1.2 billion to $3.6 billion subsidy to Foxconn to illustrate these points. We show that under realistic scenarios the subsidy may depress state economic activity by tens of billions of dollars over the next 15 years.
The Economics of a Targeted Economic Development Subsidy
Matthew D. Mitchell,Mick. Farren,Jeremy Horpedahl,Olivia Gonzalez
Published 2020 in Social Science Research Network
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- Publication year
2020
- Venue
Social Science Research Network
- Publication date
2020-01-07
- Fields of study
Business, Economics
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