Do Movie Production Incentives Generate Economic Development?

Abstract

Movie production incentives (MPI) are a popular economic development strategy employed by US states. Film subsidies are intended to encourage external investment into an untapped industry that spills over onto complementary industries to generate economic growth through a multiplier. Despite their widespread use, the positive impact of MPIs on state economies has not been documented, and several states have halted MPI programs due to high costs and questionable efficacy. This study exploits the staggered implementation, suspension, and elimination of film incentive programs across states to estimate the macroeconomic impact of MPIs. Instrumental variable estimates that permit causal inference do not support the hypothesized positive impacts of film incentives on state economies.

Keywords: Economic Development Policy, Tax Incentives, Tax Credits, Film Industry, Movie Production Incentives

JEL Classification: H25, H71, L82, R11, R38, Z11, Z18