Growing an Industrial Cluster?: Movie Production Incentives and State Film Industries

After witnessing the success of Canadian strategies to attract U.S. film production in the 1990s, states and localities began offering financial incentives in an effort to lure film and video production away from their traditional hubs in California and New York (Christopherson & Rightor, 2010). This effort increased dramatically in the 2000s, both in scope and in scale. Production activity can now locate in states offering rebates of up to 40 percent of costs, even if this exceeds their actual tax bills, and all but a handful of states offer some form of tax incentives (Christopherson & Rightor, 2010; Katz & Rosenthal, 2006; National Conference of State Legislatures, 2011; Vock, 2008). While some states may be reducing incentive packages in the current climate of fiscal austerity, others are doubling down on that strategy as an effort to stimulate job growth and increased economic activity. And while most states tout many successes from these programs in both metrics, the question of whether such policies promote long-term sustainable economic development has not been fully answered. First I use theoretical literature to construct a model of sustainable industrial development. I will then test this model using a variety of methods and data sets at the national, and state and county levels. In the following two analytical chapters, I will evaluate the impacts of incentives on state-level employment and firm growth, followed by an assessment of the economic effects of incentives in one such state: Georgia. By using this variety of approaches and units of analysis, I hope to shed light on both the macro- and micro-level impacts such incentives have on the industrial economic development of states. In the first study, I use data from the County Business Patterns (CBP) over the years 2002-2013 to view changes in economic activity by state by the level of incentives offered. Using panel data for industry employment, establishment and occupational employment, I use a fixed and random effects regression models to view the relationship between the presence of incentives and the levels of employment and firms in the film industry of each state. Next, I use Georgia as a case study with which to evaluate the degree to which financial incentives for the motion picture industry can create a sustainable network of local firms and workers. I test these theories by using confidential QCEW data to analyze establishment-level activity and relative locations. The results neither completely confirm nor disprove the hypothesis that attracting mobile productions with state tax incentives can establish a nascent industry and generate long-term employment in a region. However, there is some evidence that the number of years the MPIs are in effect does have a positive impact, especially on establishments and occupations. Additionally, the states’ climate and transportation access relative to Los Angeles and other locations are important factors in building a local industry