Do Business Subsidies Lead to Increased Economic Activity? Evidence from Arkansas's Quick Action Closing Fund

40 Pages Posted: 27 Apr 2018

See all articles by Jacob Bundrick

Jacob Bundrick

University of Central Arkansas - Arkansas Center for Research in Economics

Thomas Jack Snyder

University of Central Arkansas

Date Written: December 6, 2017

Abstract

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

Bundrick, Jacob and Snyder, Thomas Jack, Do Business Subsidies Lead to Increased Economic Activity? Evidence from Arkansas's Quick Action Closing Fund (December 6, 2017). Available at SSRN: https://ssrn.com/abstract=3169574 or http://dx.doi.org/10.2139/ssrn.3169574

Jacob Bundrick (Contact Author)

University of Central Arkansas - Arkansas Center for Research in Economics

United States

Thomas Jack Snyder

University of Central Arkansas ( email )

Conway, AR 72035-0001
United States

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