Assessing the Effects of Place-Based Policy on Spatial Inequality and the Distribution of Household Income: Evidence from Tax Increment Financing

Abstract

This research examines the effects of tax increment financing (TIF) on spatial inequality from 1990 to 2014 in Cook County, Illinois. The author explores the effects of TIF on real income and income distribution and examines whether the effects lead to a reduction in spatial inequality. To address the question of spatial inequality, dependent variables are constructed that assess the probability of TIF increasing upward mobility on the real income ladder and catching up with other areas. The results show beneficial distributional effects, but the effects are much attenuated when examining changes in the probability of moving up in the rankings, indicating that the effects of TIF are limited in reducing spatial inequality in the region.

Keywords

tax increment financing TIF place-based policy spatial inequality

Get full access to this article

View all access options for this article.

References

Austin

Glaeser

Summers

L. S. L.

(2018). Saving the heartland: Place-based policies in 21st century America. Brookings Papers on Economic Activity, Spring, 151–255. https://www.brookings.edu/wp-content/uploads/2018/03/AustinEtAl_Text.pdf

Beeson

P. E.

Eberts

R. W.

(1989). Identifying productivity and amenity effects in interurban wage differentials. Review of Economics & Statistics, 71(3), 443–452. https://doi.org/10.2307/1926901

Billings

(2009). Do enterprise zones work?: An analysis at the borders. Public Finance Review, 37(1), 68–93. https://doi.org/10.1177/1091142108321238

Bondonio

Greenbaum

R. T.

(2007). Do local tax incentives affect economic growth? What mean impacts miss in the analysis of enterprise zone policies. Regional Science and Urban Economics, 37(1), 121–136. https://doi.org/10.1016/j.regsciurbeco.2006.08.002

Busso

Gregory

Kline

(2013). Assessing the incidence and efficiency of a prominent place based policy. American Economic Review, 103(2), 897–947. https://doi.org/10.1257/aer.103.2.897

Byrne

P. F.

(2010). Does tax increment financing deliver on its promise of jobs? The impact of tax increment financing on municipal employment growth. Economic Development Quarterly, 24(1), 13–22. https://doi.org/10.1177/0891242409350887

Callaway

Sant’Anna

P. H. C.

(2021). Difference-in-differences with multiple time periods. Journal of Econometrics, 225(2), 200–230. https://doi.org/10.1016/j.jeconom.2020.12.001

Camiros Ltd . (2014). 107^th/Halstead TIF redevelopment plan and project. https://www.chicago.gov/city/en/depts/dcd/supp_info/redevelopment_plans.html.

Capello

Nijkamp

(2009). Regional growth and development theories in the twenty-first century - recent theoretical advances and future challenges. In Capello

Nijkamp

(Eds.), Handbook of regional growth and development theories (pp. 1–18). Edward Elgar Publishing.

10.

Carroll

D. A.

(2008). Tax increment financing and property value. Urban Affairs Review, 43(4), 520–552. https://doi.org/10.1177/1078087407308516

11.

Cherone

(2021, September 30). More than $1B in Chicago property tax revenues claimed by TIF Funds in 2020 [Report]. https://news.wttw.com/2021/09/30/more-1b-chicago-property-tax-revenues-claimed-tif-funds-2020-report.

12.

Czurylo

(2023). The effect of tax increment financing districts on job creation in Chicago. Journal of Urban Economics, 134, 103510. https://doi.org/10.1016/j.jue.2022.103510

13.

de Chaisemartin

D’Haultfœuille

(2020). Two-way fixed effects estimators with heterogeneous treatment effects. American Economic Review, 110(9), 2964–2996. https://doi.org/10.1257/aer.20181169

14.

Drucker

Kim

Weber

(2019). Did incentives help municipalities recover from the Great Recession? Evidence from Midwestern cities. Growth and Change, 50(3), 894–925. https://doi.org/10.1111/grow.12318

15.

Dye

R. F.

Merriman

D. F.

(2000). The effects of tax increment financing on economic development. Journal of Urban Economics, 47(2), 306–328. https://doi.org/10.1006/juec.1999.2149

16.

Ehrlich

M. V.

Seidel

(2018). The persistent effects of place-based policy: Evidence from the West-German Zonenrandgebiet. American Economic Journal: Economic Policy, 10(4), 344–374. https://doi.org/10.1257/pol.20160395

17.

El-Khattabi

A. R.

Lester

T. W.

(2019). Does tax increment financing pass the “but-for” test in Missouri? Economic Development Quarterly, 33(3), 187–202. https://doi.org/10.1177/0891242419859097

18.

Elvery

J. A.

(2008). An evaluation of the enterprise zone programs of California and Florida. 1–16. https://doi.org/10.1177/0891242408326994.

19.

Ernest R. Sayer Enterprise, Inc. (2009). Irving Park/Elston tax increment financing redevelopment plan and project. https://www.chicago.gov/city/en/depts/dcd/supp_info/redevelopment_plans.html .

20.

Fisher

P. S.

Bruner

(2003). Tax increment financing in Iowa: What should be done? Iowa Policy Project.

21.

Funderburg

(2019). Regional employment and housing impacts of tax increment financing districts. Regional Studies, 53(6), 874–886. https://doi.org/10.1080/00343404.2018.1490013

22.

Ganong

Shoag

(2017). Why has regional income convergence in the U.S. declined? Journal of Urban Economics, 102, 76–90. https://doi.org/10.1016/j.jue.2017.07.002

23.

Goodman-Bacon

(2021). Difference-in-differences with variation in treatment timing. Journal of Econometrics, 225(2), 254–277. https://doi.org/10.1016/j.jeconom.2021.03.014

24.

Hanson

Rohlin

(2013). Do spatially targeted redevelopment programs spillover? Regional Science and Urban Economics, 43(1), 86–100. https://doi.org/10.1016/j.regsciurbeco.2012.05.002

25.

Kane

Weber

(2016). Municipal investment and property value appreciation in Chicago’s tax increment financing districts. Journal of Planning Education and Research, 36(2), 167–181. https://doi.org/10.1177/0739456X15600034

26.

Kilkenny

M. K.

Kraybill

(2003). Economic rationales for and against place-based policy (Staff General Research Paper No. 11730). Iowa State University, Department of Economics. https://www.researchgate.net/publication/5132267.

27.

Kim

(2023). The dynamic and persistent effects of tax increment financing as an example of place-based policy: Evidence from Cook County, Illinois. Regional Studies, 1–17. https://doi.org/10.1080/00343404.2023.2242401

28.

Kline

Moretti

(2014). People, places, and public policy: Some simple welfare economics of local economic development programs. Annual Review of Economics, 6(1), 629–662. https://doi.org/10.1146/annurev-economics-080213-041024

29.

Lester

T. W.

(2014). Does Chicago’s tax increment financing (TIF) programme pass the ‘but-for’ test? Job creation and economic development impacts using time-series data. Urban Studies, 51(4), 655–674. https://doi.org/10.1177/0042098013492228

30.

Louik\Schneider & Associates, Inc. (1996). 35^th/Halstead redevelopment project area tax increment finance program. https://www.chicago.gov/city/en/depts/dcd/supp_info/redevelopment_plans.html.

31.

Man

J. Y.

(1999). The impact of tax increment financing programs on local economic development. Journal of Public Budgeting, Accounting & Financial Management, 11(3), 417–430. https://doi.org/10.1108/jpbafm-11-03-1999-b005

32.

Man

J. Y.

Rosentraub

M. S.

(1998). Tax increment financing: Municipal adoption and effects on property value growth. Public Finance Review, 26(6), 523–547. https://doi.org/10.1177/109114219802600601

33.

Merriman

(2018). Improving tax increment financing (TIF) for economic development. Lincoln Institute of Land Policy.

34.

Myrdal

(1957). Economic theory and underdeveloped regions. Methuen.

35.

Neumark

Kolko

(2010). Do enterprise zones create jobs? Evidence from California’s enterprise zone program. Journal of Urban Economics, 68(1), 1–19. https://doi.org/10.1016/j.jue.2010.01.002

36.

Olfert

M. R.

Partridge

M. D.

Berdegue

Escobal

Jara

Modrego

(2014). Places for place-based policy. Development Policy Review, 32(1), 5–32. https://doi.org/10.1111/dpr.12041

37.

Reynolds

C. L.

Rohlin

S. M.

(2015). The effects of location-based tax policies on the distribution of household income: Evidence from the federal empowerment zone program. Journal of Urban Economics, 88, 1–15. https://doi.org/10.1016/j.jue.2015.04.003

38.

Roback

(1982). Wages, rents, and the quality of life. Journal of Political Economy, 90(6), 1257–1278. https://doi.org/10.1086/261120

39.

Rosen

(1974). Hedonic prices and implicit markets: Product differentiation in pure competition. Journal of Political Economy, 82(1), 34–55. https://doi.org/10.1086/260169

40.

Sampson

R. J.

(2019). Neighbourhood effects and beyond: Explaining the paradoxes of inequality in the changing American metropolis. Urban Studies, 56(1), 3–32. https://doi.org/10.1177/0042098018795363

41.

S.B. Friedman & Company. (2005). 26^th & King Drive redevelopment project area tax increment finance district eligibility study, redevelopment plan and project. https://www.chicago.gov/city/en/depts/dcd/supp_info/redevelopment_plans.html .

42.

Shambaugh

Nunn

(2018). Place-based policies for shared economic growth. The Hamilton Project & Brookings Institution. https://www.brookings.edu/wp-content/uploads/2018/09/THP_PBP_fullbook_web_1003.pdf

43.

Smith

B. C.

(2006). The impact of tax increment finance districts on localized real estate: Evidence from Chicago’s multifamily markets. Journal of Housing Economics, 15(1), 21–37. https://doi.org/10.1016/j.jhe.2006.02.003

44.

Soja

(2010). Seeking spatial justice. University of Minnesota Press.

45.

Theodos

Stacy

Teles

Davis

Hariharan

(2022). Place-based investment and neighborhood change: The impacts of new markets tax credits on jobs, poverty, and neighborhood composition. Journal of Regional Science, 62(4), 1092–1121. https://doi.org/10.1111/jors.12587

46.

U.S. Bureau of Labor Statistics. (2002). Consumer Expenditures Report in 2002. https://www.bls.gov/cex/csxann02.pdf .

47.

U.S. Census Bureau. (2010). Decennial census. Social Explorer. http://www.socialexplorer.com/

48.

Warner

M. E.

Zheng

(2013). Business incentive adoption in the recession. Economic Development Quarterly, 27(2), 90–101. https://doi.org/10.1177/0891242413479140

49.

Weber

Bhatta

S. D.

Merriman

(2003). Does tax increment financing raise urban industrial property values? Urban Studies, 40(10), 2001–2021. https://doi.org/10.1080/0042098032000116086

50.

Weber

Bhatta

S. D.

Merriman

(2007). Spillovers from tax increment financing districts: Implications for housing price appreciation. Regional Science and Urban Economics, 37(2), 259–281. https://doi.org/10.1016/j.regsciurbeco.2006.11.003

51.

Weber

Hendrick

Thompson

(2008). The effect of tax increment financing on school district revenues: Regional variation and interjurisdictional competition. State and Local Government Review, 40(1), 27–41. https://doi.org/10.1177/0160323X0804000103

52.

Yadavalli

Landers

(2017). Tax increment financing: A propensity score approach. Economic Development Quarterly, 31(4), 312–325. https://doi.org/10.1177/0891242417733801

Supplementary Material

Please find the following supplemental material available below.

For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.

For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.

0.00 MB

0.61 MB