By Aaron Newell

Where should state governments’ target economic incentives? Should they attempt to boost already thriving counties, or should they focus on developing poorer counties? Dango Kumwenda, an ACRE Fellow and BT����MBA student, recently wrote an op-ed for the Arkansas Democrat-Gazette titled “” arguing that Arkansas is misallocating its economic development incentives by focusing most of them in the richest counties in the state.

Kumwenda cites economist : in a county with 10% unemployment, with a new incentive package that creates 1000 jobs, half of these jobs will simply be filled by people switching jobs within the county. In a county with 4% unemployment, the same package will result in only 200 new jobs.

Kumwenda also specifically addresses the situation in Arkansas:

“[T]he Arkansas Economic Development Commission reported signing 133 new incentive agreements in 2017 alone. Of those 133, the state gave out a total of 67 incentive packages that were aimed specifically at creating and retaining jobs. Of those 67 packages, a staggering 47 of them were given to companies in the 15 richest counties, and 30 went to firms in three of the four wealthiest counties in the state. By comparison, companies in the 22 poorest counties received only 5 incentive packages in 2017.”

Kumwenda encourages Arkansas to focus on the poorer counties in Arkansas to create more prosperity. To read the full op-ed, .

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

Jacob Bundrick, ACRE’s policy analyst on this issue, has many related works on his author page. Bundrick’s latest publication, “” is a policy review highlighting five ways Arkansas officials could improve the Quick Action Closing Fund.

ACRE also brought in one of the top researchers in the field of targeted economic development incentives as part of our Distinguished Speaker Series. , Professor in the Department of Government at the University of Texas-Austin and author of , spoke about his own research on economic development incentives. You can watch a video summarizing Jensen’s research . You can view the entire lecture on ACRE’s YouTube page .

Dango 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 Society of Business, Industry, and Economics conference. Kumwenda has been working with BT����Assistant Professor of Economics Dr. Weici Yuan on a paper that investigates the relationship between economic development incentives, migration patterns, and employment.

Policy makers trying to create a better environment for businesses have many different options – but some are better than others. ACRE Policy Analyst Jacob Bundrick recently discussed some of these options with John Evans and Rachel Sapin of IntraFish.com. In an article published on March 12th, “” Bundrick explains how targeted economic development incentives aren’t necessarily the key to booming business.

Bundrick states:

“Businesses make decisions for a variety of different reasons. They are looking for a workforce that fits their needs, proximity to customers and suppliers, certain natural resources that are only available in certain places,. . . A lot of times the evidence shows it’s not for these incentives.”

Bundrick has done extensive research on targeted economic development incentives. His most recent ACRE publication is “Government Accountability: 5 Fixes for Arkansas’s Quick Action Closing Fund.” For a quick, one-page summary go here.

Evans and Sapin are writing about land-based salmon farms in the United States and how this industry is taking off, in part due to incentives. There are, however, land-based salmon farm company executives and owners that flatly explain that incentives play no role in their site selection process, such as CEO Johan Andreassen of Atlantic Sapphire in Florida. Evans and Sapin write that while these companies may gain some benefits from these deals, Bundrick’s research is evidence that these can be a bad deal for taxpayers.

They state:

“Analysts at the Arkansas Center for Research in Economics (ACRE), for example, found the vast majority of empirical analysis fails to show clear benefits between offering targeted incentives and economic growth.

In that study, analysts could identify no relationship between the value of subsidies and private employment, and furthermore found businesses would have located or expanded in certain area regardless of the financial layout.”

For more on targeted economic development incentives, go here.

You can also find more of Bundrick’s work on his author page here.