The MSF-MEDC reports that the MBDP program disbursed $156.7 million and helped create 17,913 jobs. That works out to a cost of about $8,747 per job. The findings of our model, however, produce no statistically reliable positive impact of MBDP incentives on employment.
Our first estimation involved the cumulative employment effects over time in counties with MBDP projects. We find a slightly negative impact, showing a loss of about 600 jobs per $500,000 of MBDP incentives. This is the cumulative result after 10 quarters, or two-and-a-half years, of the program’s operation. Even using a slightly different version of the PVAR model, the results are similar, finding effects that were not statistically significant different from zero. (See the technical appendix for more information.)
Measuring the total employment impacts of the MBDP by county was the focus of this statistical model, but we also dove deeper given the makeup of MBDP projects. Most MBDP dollars are allocated to manufacturing firms. We looked again at the data just zeroing in on the impact the program might have on the manufacturing sector and we found a similar outcome: The cumulative impact on total employment in manufacturing over 10 quarters due to MBDP incentives produced no statistically significant or economically meaningful impact based on our models.
In sum, the results of our model show that the impact of MBDP projects on total employment in a county was negative: For every $500,000 worth of disbursed incentives, counties lost about 600 jobs. The results based just on manufacturing firms produced a better result statistically, but it wasn’t a net positive. The clearest interpretation of this work is that our model found no statistically meaningful impact on manufacturing jobs from MBDP incentives.
It may seem counterintuitive that giving select companies $500,000 actually leads to a reduction in total jobs in a county. But there are plausible explanations for this reality. One could be that firms receiving MBDP grants are crowding out other projects in a county that would have had a larger positive economic impact. Another possibility is that other incentives provided by local economic development agencies — which are required to participate in MBDP projects — are producing these negative externalities. These local incentives may have the effect of driving up tax rates on firms not receiving MBDP grants and producing a net loss in jobs for the county.
These are speculations — we were not able to measure or test the crowding out effect or the potential negative effect local economic development initiatives may create. But what our models suggest is that doling out MBDP grants to firms is not having a positive impact on jobs in a county. Unobserved effects must be crowding out or nullifying the impact of MBDP grants. These results should encourage policymakers to reassess the value of this program.