Dear Secretary Decker

Having so much in common with Pat McCrory, you're probably not inclined to put much stock in scientific evidence. But just in case you have a moment of weakness, here are some facts that should inform your misguided delusions about corporate incentives.

Our biggest takeaway: there is virtually no association between economic development incentives and any measure of economic performance. We found no statistically significant association between economic development incentives per capita and average wages or incomes; none between incentives and college grads or knowledge workers; and none between incentives and the state unemployment rate. The scatter-graph [follow link] above illustrates the lack of any relationship between incentives per capita and wages.

Our findings are consistent with the broad body of research on incentives. A detailed 2002 study, published in the Journal of Regional Science [PDF] of more than 350 companies that received incentives, found incentives had a negative effect on these companies's ability to create jobs. Using detailed statistical models to control for a wide variety of factors, the study found that companies that received incentives expanded more slowly than others, and worse yet that overall effect of incentives was a reduction of 10.5 jobs per establishment. Incentives had their biggest effect by far not on actual jobs, but on "announced growth," finding that the average business receiving incentives overestimated its future employment by 28.5 jobs.

Not only is it morally wrong to bribe private companies with taxpayer dollars, it's very clear that the entire incentives model doesn't actually work.


Crackhead corporations and terminal groins

People point to specific examples where they believe economic incentives produce results at a particular point in time. Those anecdotes don't hold up under scrutiny. And in the rare cases where they do, they do untold damage elsewhere in our economic system.

Incentives are the drug of choice for "crackhead corporations" ... you have to feed the addiction forever.

Here's another apt analogy: hardened beach structures. Incentives give the illusion of doing good for a short while in one particular spot, while causing accelerated erosion farther down the coast. And even where they do work, they don't work for long.