My new book is being released today, "Making Sense of Incentives: Taming Business Incentives to Promote Prosperity". This book summarizes in 120 pp, for a broad audience, much of my research on incentives. The pdf is available for free download via: upjohn.org/research-highl…
The book summarizes some of the problematic facts about incentives: they've tripled since 1990, they tend to disproportionately go to the largest corporations, & they are not targeted at distressed areas.
I also try to dispel myths about incentives. Contrary to these myths, incentives only tip a minority of location decisions, and do not pay for themselves with fiscal benefits.
But more jobs in a local labor market can be quite valuable. How can incentives be reformed to have a better benefit-cost ratio? (1) Limit long-term incentives, which have less effect;
(2) rely more on promoting local job growth via customized business services to smaller businesses, which are more cost-effective in creating jobs than tax & other cash incentives;
(3) target incentives more at economically distressed areas, where the impact of more jobs on local employment rates are likely to be higher;
(4) target more high-tech firms in existing high-tech clusters, which have higher multiplier effects;
(5) encourage more local hiring via "first source" hiring agreements & customized job training;
(6) make sure that incentives are combined with programs to build job skills, develop infrastructure, develop high-quality land for business development, and have strong business services. This includes avoiding financing incentives via cuts in productive public services.
This point about including skills development in local economic development has been made by many, including @joeparilla of @BrookingsMetro , & by our place-based initiative at the @UpjohnInstitute , co-directed by me, @mmilleradams , & Brad Hershbein. research.upjohn.org/reports/235/
My book also tries to be useful to evaluators, by outlining how we can develop PRACTICAL strategies for evaluating incentive programs, where randomized experiments are rarely feasible. I outline evaluations based on natural experiments,....
regression discontinuity designs based on quantitatively assigning firms or regions to assistance, surveys of assisted firms, and simulations based on prior research.
Finally, I outline ideal state programs, ideal federal interventions, and practical strategies to get there. These strategies must start with transparency, as @GoodJobsFirst has argued for many years. But then we need to limit LT incentives & emphasize business services more.
This book benefited not only from MANY @UpjohnInstitute staff efforts, but from outside comments by @Richard_Florida , @amy_liuw , @econjared & Michael Mazerov.
In addition, the book draws on much research by @GoodJobsFirst , @NateMJensen , @MiddleClassPoli , @BrookingsMetro, @MarkMuro1 , @mrandall_urban & others on incentives.
@GoodJobsFirst @NateMJensen @MiddleClassPoli @BrookingsMetro @MarkMuro1 @mrandall_urban I also received helpful comments by Jeff Chapman and Mark Robyn at @pewtrusts
