Economic Development Incentives Have Little Effect

In a rare study that uses facility specific employment data, twoprofessors looking at hundreds of establishments in Ohio found thateconomic development incentives have very little (or even a negative)effect on job creation. Professors David Kraybill of Ohio State and Todd Gabe of the Universityof Maine looked at 366 establishments that expanded between 1993 and1995, and compared those that received state incentives with those thatdid not. ".. we found that the effect of incentives on establishmentsthat received incentives is a decrease of 10.5 jobs per establishment....The effect of incentives onestablishments that did not receive incentives is an increase of 6.5jobs per establishment." The professors also found that companies thatreceived incentives inflated job creation projections. The article by Todd M. Gabe and David S. Kraybill, "The Effect of State Economic Development Incentives on Employment Growth of Establishments" appears in the Journal of Regional Science, Vol. 42, No. 4, 2002, pp. 703-730. A PDF file of this published article is made available on-line by permission granted 3/27/03 by Blackwell Publishing, Ltd. [The link below is to a 1 MB PDF document.]