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Academic scholars get a lot of flak for being wordy and opaque. But look at this: “Economic development incentives, on average, fail to produce new employment opportunities.”

That’s from the second page of a working paper released this month by the W.E. Upjohn Institute for Employment Research. The paper, called “Striking a Balance: A National Assessment of Economic Development Incentives,” was written by Mary Donegan, an assistant professor-in-residence in the Department of Community and Urban Studies at the University of Connecticut, along with T. William Lester and Nichola Lowe, both associate professors of city and regional planning at The University of North Carolina at Chapel Hill.

The paper is still being peer-reviewed for publication in a journal that the authors say they can’t disclose yet. But the authors say it’s among the first studies of economic development incentives nationwide that looks at the cause-and-effect relationship between incentives and job growth. The paper compares employment changes at firms that have received incentives from state governments to unsubsidized firms of similar size, age, and industry. It finds that, in the case of small firms, incentives can have some positive impacts on job growth. But in the case of large firms, incentives actually correspond to reductions in overall employment. The paper adds to a growing body of scholarship that undercuts the basic premises of much economic development incentive policy.

“By comparing incentivized establishments to a carefully selected control group, we cast doubt on the biggest claim made by incentive proponents that ‘but for’ the incentive payment, job creation would not occur,” the authors write in the introduction. “This simple but direct finding — that incentives do not create jobs — should prove critical to policymakers. However, we also show how incentives can be more effective by examining the disparate impacts by firm size.”

Read the rest of the article at Next City:


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Author: Jared Brey is a freelance reporter based in Philadelphia. His work has been featured in Philadelphia magazine, PlanPhilly, Hidden City, The Philadelphia Inquirer, City & State, Grid magazine, and other publications.

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