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Journal of Policy Studies
Graduate School of Public Administration, Seoul National University

J. Policy Stud. 2022; 37(4):39-55

pISSN: 2799-9130, eISSN: 2800-0714

DOI: https://doi.org/10.52372/jps37403

Article

The EFFECTS of STATE and LOCAL TAX-BASED INCENTIVES on U.S. LABOR MARKETS, 1990–2015: BOON or BOONDOGGLE?

Hakyeon Lee1https://orcid.org/0000-0002-3994-8558, J.S. Butler2
1Department of Local Governance, Gyeonggi Research Institute, cauhak1983@gmail.com
2Martin School of Public Policy and Administration, University of Kentucky, jsbutl3@email.uky.edu

ⓒ Copyright 2022 Graduate School of Public Administration, Seoul National University. This is an Open-Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/4.0/) which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited.

Received: Apr 18, 2022; Accepted: Sep 14, 2022

Published Online: Dec 31, 2022

Abstract

Clear evidence about the effectiveness of economic development incentives is limited. To bridge this research gap, this study uses the Upjohn Institute Panel Database on Incentives and Taxes (PDIT). Unemployment and employment rates are used to analyze the effectiveness of tax-based incentives. Statistical results indicate that tax incentives have a marginal impact on employment status and limited benefits to states. Only the R&D tax credit statistically significantly increases employment rates. This result supports the interpretation of economic development policies as a zero-sum game.

Keywords: Tax-based incentives; state governments; economic development policies; zero-sum game