The authors examine the effects of state enabling legislation on local economic development policies. Using the 1989 International City/County Management Association economic development data set, economic development practices in cities located in states permitting and prohibiting local tax abatements are compared. They find that although state restrictions on local tax abatements have only limited effects on local policy activity, some evidence suggests that cities in states prohibited from offering abatements are less likely to use financial inducements to attract business and are more likely to employ some types of the more entrepreneurial demand-side incentives, particularly those related to the start-up of new firms.
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