Economic Development

In researching compartive economic development models the data seems to indicate that there is a race to the bottom, i.e. the states or country that gives away the most to projects that would have been developed anyway win. The problem with that thesis is it’s a bit simplistic as there are many examples of states in that it:

1. Fails to recongixe that we live in a global economy as well as a natinal ecoomy and companies and invtors have real chocies;

2. It’s most often put forth by northeastern states and California which have been the major losers in the economic growth fo rthe last ten years;

3. It assumes sound government polices do not matter in business location decisions when it’s one of the top three considerations in the decsion maker’s consideration;

4. If a state or nation has sound policies and government, is there a need for economic development giveaways at all?

Thoughts?

Domenick

 

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2 thoughts on “Economic Development

  1. Domenick, I’m glad you raised this issue and I know it is one you have been mulling over a lot lately. My two cents are that complaining about a “race to the bottom” is a bit simplistic, since it ignores the political realities of deal-making and the financial realities of weak markets. I do think it is dangerous to rely solely on incentives, at the expense of improving one’s overall business climate; incentives are a just a tool, and like any tool they can be used well or poorly.

  2. Domenick, could you please give an example of a comparative economic model that you have been studying and mulling over and how it leaves you with the conclusion that it is a race to the bottom? I would like to have a much better grasp of the issue you’re raising — my knowledge is elementary at best and I would like to know more!

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