The Effects of State and Local Economic Incentives on Business Start-Ups in the U.S.: County-Level Evidence

31 Pages Posted: 23 Apr 2019

See all articles by Mark Partridge

Mark Partridge

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics

Alexandra Tsvetkova

Organization for Economic Co-Operation and Development (OECD)

Sydney Schreiner

Ohio State University (OSU) - Economics and International Studies

Carlianne Patrick

Georgia State University - Department of Economics

Date Written: March 2019

Abstract

Even as economic incentives are increasingly used by policymakers to spur state and local economic development, their use is controversial among the public and academics. We examine whether state and local incentives lead to higher rates of business start-ups in metropolitan counties. Existing research indicates that start-ups are important for supporting (net) job creation, long-term growth, innovation, and development. We find that incentives have a statistically significant, negative relationship with start-up rates in total and for some industries including export-based and others that often receive incentives. Our findings support critics who contend that incentives crowd out other economic activity, potentially reducing long-term growth. We also find that greater inter-sectoral job mobility is positively linked to total start-ups, consistent with claims of those who advocate for policies that enhance labor market flexibility via reducing barriers to movement of resources.

Suggested Citation

Partridge, Mark D. and Tsvetkova, Alexandra and Schreiner, Sydney and Patrick, Carlianne, The Effects of State and Local Economic Incentives on Business Start-Ups in the U.S.: County-Level Evidence (March 2019). Andrew Young School of Policy Studies Research Paper Series No. 19-02. Available at SSRN: https://ssrn.com/abstract=3376166 or http://dx.doi.org/10.2139/ssrn.3376166

Mark D. Partridge

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics ( email )

2120 Fyffe Rd
Columbus, OH 43210-1067
United States

Alexandra Tsvetkova

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Sydney Schreiner

Ohio State University (OSU) - Economics and International Studies ( email )

33 Townshend Hall
1885 Neil Avenue
Columbus, OH 43210-1222
United States

Carlianne Patrick (Contact Author)

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States
(404)413-0156 (Phone)

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