Congrats to ACRE Undergraduate Research Fellow and new BTĚěĚĂalumnae Erica Smith for being named economics student of the year by the !

Smith plans to begin her professional career with a few years working in supply chains and learning about logistics before pursuing a graduate degree. Erica majored in economics while at BTĚěĚĂand is originally from Vilonia.

Smith was a part of ACRE’s Research Fellowship Program. In this program, students work with a professor or policy expert to write a publishable research paper and an op-ed. 

Smith studied the intersection of economic development incentives and politics in Arkansas.

A new working paper entitled “Do Politicians Use Targeted Economic Incentives for Political Gains? Evidence from Arkansas Gubernatorial Elections” co-authored by Smith, ACRE Affiliated Researcher and BTĚěĚĂLecturer I of Economics Jacob Bundrick, and BTĚěĚĂAssistant Professor of Economics Dr. Weici Yuan examines the question of whether there’s a connection between getting re-elected and which counties get economic development incentives.

Smith is also one of four fellows in ACRE’s inaugural summer fellowship program. Over the summer, she and three other BTĚěĚĂalums will continue to work on research with a mentor, participate in an online reading group, and professional development training. She will also continue to be a tutor for econometrics. 

Smith is also a two time recipient of an ACRE travel reimbursement award. She received funding last summer to study the ideas of classical liberalism in Prague and in the fall of 2019 she attended the 2019 O’Neil Center Annual Conference, “Past As Prologue: What History Teaches Us About Today’s Economy” in Dallas, TX. 

For more of ACRE researchers’ work on targeted economic development incentives, go here.

By Caleb Taylor

Are economic development incentives a cost or benefit to Arkansas? 

ACRE Affiliated Researcher and BTĚěĚĂLecturer I of Economics Jacob Bundrick was quoted in an article in the Arkansas Democrat-Gazette titled “,” published on December 14. 

The article focuses on an annual cost-benefit study of economic development incentives by Arkansas Legislative Audit.

The study found “TaxBack, Advantage Arkansas, Create Rebate and Invest Arkansas (incentive) programs have a net positive cost effectiveness, while In-House Research and Development-Targeted Business projects were negative cost effective.”

However, Bundrick disputed the study’s methodology of incentives being “analyzed under the assumption that, without the incentive, the corresponding economic activity would not have occurred.”

Bundrick said:

We see time and again that incentives are not the deciding factor in a company’s location/expansion decision, but merely serve as a reward for doing as they intended. In these cases, incentives are a cost to taxpayers and provide no benefit. Put more simply, if the assumptions used in the analysis are invalid, how can we trust the results? We’re making real decisions with real taxpayer money using analysis we know to be flawed.”

Bundrick was also interviewed by about the Arkansas Legislative Audit study.

Bundrick and BTĚěĚĂAssistant Professor of Economics Dr. Weici Yuan published a paper recently on a similar topic titled “,” published in Economic Development Quarterly on September 20, 2019. 

Bundrick and Yuan use evidence from Arkansas’s Quick Action Closing Fund (QACF) to analyze how effective deal-closing funds are at increasing incomes and decreasing poverty at the county level. Their results indicate that the funds are ineffective at achieving these goals. 

For more of ACRE researchers’ work on targeted economic development incentives, go here.

Bundrick’s latest publication, “” is a policy review highlighting five ways Arkansas officials could improve the Quick Action Closing Fund.

For a summary of the costs of Arkansas’s Quick Action Closing Fund, go here.

By Caleb Taylor

What are the costs of Arkansas’s economic development incentives?

ACRE Policy Analyst Jacob Bundrick discussed this and more with the Faulkner County Tea Party on Thursday, May 9th at Larry’s Pizza in Conway.

During his presentation, Bundrick discussed the fiscal costs, opportunity costs and the “crowding out” of existing businesses that arise from Arkansas’s economic development incentive policies.

Fiscal Costs

According to the Arkansas Department of Finance and Administration, Arkansas has spent approximately $2.32 billion (inflation adjusted) on tax incentive programs from 1984 to 2017. , the Arkansas Economic Development Commission (AEDC) signed 1,569 total incentive agreements with 82,410 jobs being proposed.

Opportunity Costs

While attracting jobs and investment to the Natural State is a laudable goal, Bundrick says these policies have opportunity costs.

Bundrick said:

Opportunity costs are what you give up to get something. If we’re using tax dollars to finance these incentive agreements, that means we don’t have those tax dollars to finance education, road projects or broad tax cuts…police or fire protection. We’re foregoing these other uses of public money. The question we have to answer if we want to be responsible with public money is: Which of these uses has the biggest return?”

Bundrick said the “bar isn’t very high”  to find other worthwhile uses of taxpayer dollars since most of the academic literature finds that incentives are ineffective. Policies that focus on the “broader business environment” like tax reform, occupational licensing reform and investments in education and infrastructure are better alternatives.

Crowding Out

Bundrick also states that “crowding out” existing businesses is another potential harm done by economic development incentive agreements.

Bundrick said:

We’re trying to attract new businesses and help certain businesses expand at the expense of other businesses. This happens because we’re providing an artificial cost advantage to the incentivized company. We give an incentive or tax break to a certain company, we’re helping them perhaps be able to sell their services or product at a lower cost than existing businesses. They’re able to perhaps take market share that might cause existing businesses some troubles. It might be that because of the artificial cost advantage they’re able to pay higher wages…they shift employees from existing businesses to incented companies. The real problem there is in places where there are workforce quality issues…the skilled employees end up at the incented companies and existing businesses can’t find people to do the work they need to do. That doesn’t leave them much choice…sometimes the existing businesses have to close down.”

To download a copy of Bundrick’s  presentation slides, go here.

For more of ACRE researchers’ work on targeted economic development incentives, go here.

Bundrick’s latest publication, “” is a policy review highlighting five ways Arkansas officials could improve the Quick Action Closing Fund.

For a summary of the costs of Arkansas’s Quick Action Closing Fund, go here.

By Caleb Taylor

Dango Kumwenda, an ACRE Fellow and BTĚěĚĂMBA student, was awarded a “Student Presentation Award” at the 2019 Society of Business, Industry and Economics (SOBIE) conference on April 11th.

Kumwenda is a part of ACRE’s Research Fellowship Program. In this program, students work with a professor to write a publishable research paper that is presented at the annual SOBIE conference. Kumwenda has been working with BTĚěĚĂAssistant Professor of Economics Weici Yuan to investigate the relationship between economic development incentives, migration patterns, and employment.

Kumwenda and Yuan’s research paper “Economic Development Incentives, Jobs and Internal Migration” was the subject of Kumwenda’s presentation at the SOBIE conference in Destin, FL.

Kumwenda’s and Yuan’s preliminary results find that state incentive programs do not increase jobs but may increase migration to states.

In addition to winning an award at SOBIE, Kumwenda also published an op-ed for the Arkansas Democrat-Gazette titled “” on April 1 arguing that Arkansas is misallocating its economic development incentives by focusing most of them in the richest counties in the state.

For more of ACRE researchers’ work on targeted economic development incentives, go here.