Economic Development Incentives

Abstract

After establishing a way of classifying economic development incentives, this article examines four different explanations of why cities differ in their willingness to provide such incentives to encourage business growth. In order of explanatory power the explanations are citizen need, administrative capacity, fiscal stress, and the process of growth. Specific types of cities are more willing to use some incentives than others. Some underlying rules are suggested to explain why city officials make the decisions they do about economic development issues. It is the symbolic value of the actions rather than their concrete consequences that motivate much of local economic development activity.