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The public is the loser in “economic war between the states”

Date Published: 07/06/2009


Via Clawback, we see a new study by the Public Policy Institute of California that finds that the state's enterprise zones have no overall effect on job growth. That's in line with findings in other states, including Minnesota, that offering tax credits and other incentives to businesses may raise employment in certain areas, but not within the region, because companies move from zone to zone to take advantage of the incentives.

The same might be said about what Federal Reserve economist Art Rolnick has called "the economic war between the states."

It is a war in which states are actively competing with one another for businesses by offering subsidies and preferential taxes. Economists find that there is a role for competition among states when it takes the form of a general tax-and-spend policy. Such competition leads states to provide a more efficient allocation of public and private goods. But when that competition takes the form of preferential treatment for specific businesses, not only is it not


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