Development Policy and Business Incentives

E conomic development policy has been a part of state and local planningfor over years. Yet the integration of economic development intowider planning functions is still limited, and the field continues to generate controversy. The provision of business incentives, in particular, has long been one of the mainstays of economic development policy, and at the same time has been the target of the most intense criticism. Indeed, there are many promi-nent critics who believe that virtually all incentive programs should be banned (see Burstein & Rolnick, ). Nevertheless, indications are that spending on incentives has continued to expand. At the heart of the controversy over economic development incentives is the fundamental yet unresolved question: Are they a cost-effective strategy for achieving economic growth? This broad question can be broken down into three more precise questions: . Do business incentives actually cause states or localities to grow more rapidly than they would have otherwise? . If so, is the growth targeted so as to provide net gains to poorer communi-ties or poorer people, or is it merely a zero-sum game? . How costly to government is the provision of these incentives compared to alternative policies? Before attempting to answer these three questions, we first address a few prelimi-nary issues: the scope of our study, the justification for focusing on these three questions, and our approach to answering them