Do High-Unemployment States Offer the Biggest Business Incentives? Results for Eight States Using the "Hypothetical Firm" Method

Abstract

This article provides a preliminary analysis of the spatial distribution of business incentives across 8 states and 27 cities. A variation on the "hypotheticalfirm " method is used to measure the size of tax and nontax incentives offered by those states and cities. The net present value of after-tax income for a 20-year period is calculated for various types and sectors of firms in each state and city. This income, which measures the intensity of the incentive offer is then related to state and city unemployment rates. The results suggest that high-unemployment cities (but not states) do offer bigger incentives.