Of all the literature discussed below, this study’s approach most resembles a 2019 article published in Urban Issues Review, “Striking a Balance: A National Assessment of Economic Development Incentives.”[5] The authors of that piece use three databases, including NETS.
Mary Donegan, T. William Lester and Nichola Lowe used a statistical sample of 2,486 incentive deals across 35 states, 180 of which were in Michigan.[6] One implication of their findings was that “establishments that received an incentive experienced employment growth that was 3.7% slower than nonincentivized establishments.”[1] In other words, firms that did not get incentives performed better than those that did. The overall conclusions, however, may be driven by the negative performance of large firms, according to the authors. They also note that “incentives seem to be more effective for smaller enterprises.”[7]
By comparing incentivized establishments to a carefully selected control group, we cast doubt on the biggest claim made by incentive proponents that “but for” the incentive payment, job creation would not occur. This simple but direct finding — that incentives do not create jobs — should prove critical to policymakers. However, we also show how incentives can be more effective by examining the disparate impacts by firm size. Here, we find that incentives granted to smaller establishments have better performance in terms of job creation compared to very large establishments, which we find to have starkly negative employment effects.[8]