The Alchemy of Local Economic Development

Although policy evaluations have raised significant concerns about the effectiveness of individual incentives such as tax abatements and special taxing districts, they beg the question of whether, in the right combination, these tools might actually work. This research focuses on this question: Are some incentives more effective in particular combinations as they would normally be applied in reality? Based on an assessment of five widely used economic development programs in the state of Michigan, the research concludes that even in combination, many commonly used incentives have no relationship to the economic health of city residents. Programs that include performance guarantees, particularly related to jobs, appear promising. For many, particularly smaller, cities offering no economic development incentives also appears to be a promising course of action.