Government and Economic Development

Abstract

Attention is focused on the impact of local government incentive policies upon business activity within cities. Data were gathered from questionnaires completed by local development officials reporting on the number of development incentives offered by the cities in the period from 1970 to 1980. Development outputs were operationalized as the change in the number of business firms, change in employment levels across all sectors, and new capital investment from 1972 to 1982. A cross-sectional methodology and multiple regression analysis were used. Results suggested some support from the relationship between development policies and urban economic growth. The number of incentives offered is positively related to change in the number of firms. Incentive policy is also positively related to changes in employment and new capital investment, but the relationship is not as strong as with the number of firms. It was suggested that, although incentives may be expensive, the costs of not acting may be much greater.