Incentives for Regional Development

This book offers cross-national evidence of the effectiveness of financial and physical incentives for regional development. It challenges the traditional wisdom that competition is harmful for regional development or can be zero-sum. It answers questions such as: What are the effects of tax incentives on the rest of the economy? Do such incentives merely redistribute employment? Do tax and infrastructure incentives have any effect on the unemployment rate of areas adopting them?

Kala Seetharam Sridhar is Fellow at the National Institute of Public Finance and Policy, New Delhi, India

List of Tables

x

List of Figures

xii

Acknowledgements

xiii

List of Abbreviations

xv

Part I Introduction

Regional Development Incentives in the United States and India

3

(16)

Introduction and background

3

(1)

Motivation for the book

3

(1)

What is the black box that converts incentives to regional development?

4

(2)

Why cross-national comparison?

6

(3)

Gaps in the literature

9

(2)

Research objectives

11

(2)

Overview of the book

13

(6)

Part II Tax Incentives: Theory and Evidence

Impact of Tax Incentives on Economies: Analytical Framework

19

(20)

Introduction and motivation

19

(1)

Literature review

19

(1)

Objectives of the model

20

(1)

Assumptions of the model

20

(2)

The model

22

(15)

Predictive power of the model

37

(2)

Competition Among American States: Evidence from Illinois Enterprise Zones

39

(25)

Introduction

39

(1)

Theoretical framework

40

(1)

Description of EZs in the United States

41

(2)

Description of enterprise zones in Illinois

43

(5)

Research methodology

48

(5)

Estimation of reservation wages

53

(4)

Benefit-cost analysis

57

(4)

Summary of the results

61

(3)

Impact of Tax Incentives on the Unemployment Rate: Evidence from Ohio

64

(23)

The importance of the problem and the motivation for research

64

(2)

Overview of the chapter

66

(1)

A model of unemployment

66

(2)

Tax incentive programmes in Ohio

68

(2)

Implementation of the model

70

(3)

Data

73

(2)

Methodology

75

(5)

Results from the estimation

80

(5)

Policy implications

85

(1)

Concluding remarks

85

(2)

Benefits and Costs of Regional Development: Evidence from Ohio's Enterprise Zone Programme

87

(30)

Introduction

87

(1)

Past literature

88

(1)

Ohio's enterprise zone programme

89

(1)

Data

90

(1)

Benefit-cost methodology

90

(7)

Benefit-cost analysis

97

(13)

Policy implications

110

(7)

Part III Infrastructure Incentives: Theory and Evidence

Impact of Growth Centres on Unemployment and Firm Location: Evidence from India

117

(22)

Introduction

117

(1)

The importance of and the motivation for research

118

(1)

Objectives

119

(5)

Description of the growth centres programme

124

(1)

Theory and model

125

(2)

Description of variables and data

127

(3)

Results from the estimation of the unemployment rate

130

(3)

Estimation for GCs

133

(5)

Concluding remarks

138

(1)

Firm Location Decisions and Their Impact on Local Economies: Evidence from India's Growth Centres

139

(30)

Introduction and motivation

139

(1)

Objectives

139

(1)

Field visits to GCs

140

(13)

Summary of GCs visited

153

(1)

Impact of GC (infrastructure), and tax incentives on firm location

154

(3)

The impact of GC firms on local labour markets

157

(2)

The export orientation of firms

159

(2)

Corporate social responsibility

161

(1)

Firm-level implications

162

(2)

Growth-centre-level implications

164

(2)

Concluding remarks

166

(3)

Part IV Lessons Learned

Lessons Learned from the United States and India

169

(16)

Introduction

169

(2)

Lessons for the United States

171

(2)

Lessons for India

173

(4)

Is the American experience relevant for India?

177

(6)

Can the corporate sector help?

183

(1)

Concluding remarks

184

(1)

Notes

185

(19)

References

204

(6)

Index

210

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Incentives for Regional Development Competition Among Sub-National Governments

Summary

Author Biography

Table of Contents

Supplemental Materials