When Are Economic Development Incentive Grants Successful?: Evidence from a Time-Series Analysis of North Carolina’s State and Local Recruitment Deals

Using two unique approaches, this research project will evaluate the basic question of whether incentives effectively increase employment. First, this project will employ an interrupted time-series research design that will compare pre- and post-trends in employment and sales growth at establishments that received a major incentive grant compared to a set of control establishments selected by industry, firm mobility, and establishment type. Second, this study will compare the economic impact and quality of incentives—as measured by metrics such as subsidy dollars per job and clawback measures—across different policy contexts. Specifically, this project will compare “deals” made in industries which are targets of additional economic development planning activities such as state funded R&D centers, workforce development initiatives, and joint industry-state planning agencies, to those deals that occur in non-supported industries. This research will focus on North Carolina and the impact of two recent incentive programs: OneNC funds, initiated in 2000; and Job Development Investment Grants (JDIG), initiated in 2003. To answer the proposed research questions, the author will analyze the impact of receiving an economic development subsidy on the growth in employment and sales. Fundamentally, the author will assess whether employment or sales grew faster at establishments that received an incentive payment relative to an appropriate control group of non-subsidized businesses. Difference-in-differences (DD) estimates that measure changes in the outcome variable before and after the subsidy was granted will be created