Do Economic Development Incentives Crowd Out Public Expenditures in U.S. States?

Wang Jia ()
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Wang Jia: Department of Economics, University of the South, Sewanee, TN, USA

The B.E. Journal of Economic Analysis & Policy, 2016, vol. 16, issue 1, 513-538

Abstract: This paper investigates whether economic development incentives (EDI) crowd out public expenditures in U.S. states. Using EDI data from a new database, this paper employs a two-way fixed effect panel framework and generalized method of moments (GMM) approach to account for dynamic features associated with public expenditures. Potential endogeneity of policy variables and problems with unbalanced panels are also addressed. Results show relatively little effect of incentives spending on most public goods expenditures contemporaneously, with negative repercussions beginning to appear in year one. Findings of this paper carry practical importance for policymakers concerning the efficacy of incentives.

Keywords: economic development incentives; public goods provision; state and local governments (search for similar items in EconPapers)
JEL-codes: H41 H71 H72 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

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DOI: 10.1515/bejeap-2015-0042

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