A new report from the Metropolitan Policy Program at Brookings considers how incentives offered in Cincinnati, Indianapolis, Salt Lake City and San Diego align with the Brookings framework for inclusive economic development. The authors examine incentive transactions by industry category and location to draw conclusions about how well incentives help the city grow from within, boost trade, invest in people and skills, and connect place (that is, link local communities to regional opportunities).

The paper finds that all four cities disproportionately incentivize advanced industries that are R&D- and STEM-intensive. These cities also tend to target their incentives to industries that support trade, measured by location quotients and the export intensity of each industry. Average earnings in incentivized industries are generally higher than average earnings in the overall economy. However, black and Hispanic workers tend to be underrepresented in the incentivized industries. The study also looks at the location of incentivized activity within each city, finding that “57% of incentives landed in communities with poverty rates” above 20%.

The report’s implications draw from the paper’s literature review as well as the research findings. We support the recommendations, many of which are consistent with our own Smart Incentives principles:

  • Situate incentives within broader economic objectives
  • Embrace transparency and evaluation
  • Target incentives to enhance productive, inclusive growth
    • Incentivize opportunity-rich firms
    • Incentivize firms to provide more opportunity
    • Incentivize firms with place in mind

To learn more please download the report, Examining the local value of economic development incentives. Evidence from four US cities, Joseph Parilla and Sifan Liu. Metropolitan Policy Program – Brookings. March 2018.