Question

According to Ellis, Hayden, and Rogers, Economic Development Incentives (EDIs) rarely work. What sorts of evidence do they cite for this claim? They have some ideas about why EDIs fail - explain at least one. Are public officials who offer firms EDIs doing something wrong? If so, what? Are firms that demand EDIs from local governments doing something wrong? If so, what?

Answer 1

They cite Peter Fisher and Alan Peters work on failures of economic development wherein the incentives have little or no impact on the location and investment decisions of firms. And according to Elizabeth Patrick these incentives provide no fiscal impact nor deterioration. There are several hidden costs which don't appear in the balance sheets of companies.

EDIs fail because empirical research can't exactly summarise why a positive outcome has taken place, cause often there are non incentive policies which occur along with the incentive programs which propel the program.

They think that governments can easily do the task which they give it to the firms, as sometimes governments give the task to the wrong firms who don't have the same goals as them. Societies have to induce firms to invest in new plants, it doesn't make sense that firms were going to expand anyways without the incentive from societies.

Public officials are choosing the wrong firms to avial the EDIs. Firms invest for their own benefit, they don't really need the incentive to invest, it is truely meaningful if a firm is induced to invest because of the incentives provided by the governments.