The Influence of Targeted Economic Development Tax Incentives on County Economic Growth: Evidence From Michigan’s MEGA Credits

Michael J. Hicks and Michael LaFaive
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Michael J. Hicks: Ball State University, Muncie, IN, USA, mhicks@bsu.edu
Michael LaFaive: Mackinac Center for Public Policy, Midland, MI, USA

Economic Development Quarterly, 2011, vol. 25, issue 2, 193-205

Abstract: This article estimates the county-level impact of the Michigan Economic Growth Authority (MEGA) Credit targeted tax incentives to firms from 1995 through 2002. The authors employ a fixed effects instrumental variable model with spatial and time autocorrelation function tested on aggregate income, employment, the unemployment rate, and sectoral activity in manufacturing, wholesale, and construction. The authors find no impacts of the MEGA credit program on county-level aggregate employment, unemployment rates, wages, or incomes. Furthermore, there is no impact of manufacturing or warehousing credits on employment or wages in these sectors. The authors do find that MEGA credits produce a transient impact on construction employment (a drop in construction wages is statistically but not economically significant). The construction impact of MEGA is an estimated $123,000 investment per construction job. Generally, 75% of these jobs last for 1 year, with the remaining 25% lasting only into the second year.

Keywords: Michigan; tax incentives; MEGA; manufacturing; warehousing (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ecdequ:v:25:y:2011:i:2:p:193-205

DOI: 10.1177/0891242410395135

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