Do Business Subsidies Lead to Increased Economic Activity? Evidence from Arkansas's Quick Action Closing Fund
40 Pages Posted: 27 Apr 2018
Date Written: December 6, 2017
State governments rely heavily on targeted economic development incentives to promote economic activity. In recent years, many states have adopted targeted subsidy programs known as “deal-closing funds” to attract and retain businesses. Despite the increased use of deal-closing funds, it remains unclear whether they provide value in terms of increasing private employment and establishments. In this paper, we analyze the relationship between deal-closing funds and county-level private employment and private establishments using evidence from Arkansas’s Quick Action Closing Fund (QACF). We estimate these relationships using a variety of fixed effects and ordinary least squares (OLS) techniques to measure both within-county and across-county relationships. We find little evidence to suggest that the QACF creates significant job and establishment growth. The results from this study should serve to better inform public policy across states as it relates to the use of targeted business subsidies.
Keywords: state government subsidies, business subsidies, project analysis, deal-closing funds, targeted economic development incentives, Arkansas
JEL Classification: H25, H71, O22, R38
Suggested Citation: Suggested Citation