Incentives for Regional Development: Competition Among Sub-National Governments

226 Pages·2005·2.01 MB·English

by  Kala Seetharam Sridhar (auth.)

Incentives for Regional Development
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Incentives for Regional
Development
Competition Among Sub-National
Governments
Kala Seetharam Sridhar
© Kala Seetharam Sridhar 2005
Softcover reprint of the hardcover 1st edition 2005 978-1-4039-4788-8
All rights reserved.No reproduction,copy or transmission of this
publication may be made without written permission.
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Any person who does any unauthorized act in relation to this publication
may be liable to criminal prosecution and civil claims for damages.
The author has asserted her right to be identified
as the author of this work in accordance with the Copyright,
Designs and Patents Act 1988.
First published in 2005 by
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PALGRAVE MACMILLAN is the global academic imprint of the Palgrave
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ISBN 978-1-349-52482-2 I SBN 978-0-230-51380-8 (eBook)
DOI 10.1057/9780230513808
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A catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Sridhar,Kala Seetharam,1966–
Incentives for regional development :competition among
sub-national governments / Kala Seetharam Sridhar.
p.cm.
Includes bibliographical references and index.
1.Economic development – Government policy.2.Regional planning –
Government policy.3.Tax incentives.4.Industrial policy.5.Industrial
promotion.I.Title.
HD75.S77 2005
338.9—dc22 2005042144
10 9 8 7 6 5 4 3 2 1
14 13 12 11 10 09 08 07 06 05
To my parents, husband and my little Vindhya
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Contents
List of Tables x
List of Figures xii
Acknowledgements xiii
List of Abbreviations xv
Part I Introduction
1 Regional Development Incentives in the United States and India 3
1.1 Introduction and background 3
1.2 Motivation for the book 3
1.3 What is the black box that converts incentives
to regional development? 4
1.4 Why cross-national comparison? 6
1.5 Gaps in the literature 9
1.6 Research objectives 11
1.7 Overview of the book 13
Part II Tax Incentives: Theory and Evidence
2 Impact of Tax Incentives on Economies: Analytical
Framework 19
2.1 Introduction and motivation 19
2.2 Literature review 19
2.3 Objectives of the model 20
2.4 Assumptions of the model 20
2.5 The model 22
2.6 Predictive power of the model 37
3 Competition Among American States: Evidence from
Illinois Enterprise Zones 39
3.1 Introduction 39
3.2 Theoretical framework 40
3.3 Description of EZs in the United States 41
3.4 Description of enterprise zones in Illinois 43
3.5 Research methodology 48
3.6 Estimation of reservation wages 53
3.7 Benefit–cost analysis 57
3.8 Summary of the results 61
vii
viii Contents
4 Impact of Tax Incentives on the Unemployment Rate:
Evidence from Ohio 64
4.1 The importance of the problem and the motivation
for research 64
4.2 Overview of the chapter 66
4.3 A model of unemployment 66
4.4 Tax incentive programmes in Ohio 68
4.5 Implementation of the model 70
4.6 Data 73
4.7 Methodology 75
4.8 Results from the estimation 80
4.9 Policy implications 85
4.10 Concluding remarks 85
5 Benefits and Costs of Regional Development: Evidence
from Ohio’s Enterprise Zone Programme 87
5.1 Introduction 87
5.2 Past literature 88
5.3 Ohio’s enterprise zone programme 89
5.4 Data 90
5.5 Benefit–cost methodology 90
5.6 Benefit–cost analysis 97
5.7 Policy implications 110
Part III Infrastructure Incentives: Theory and Evidence
6 Impact of Growth Centres on Unemployment and
Firm Location: Evidence from India 117
6.1 Introduction 117
6.2 The importance of and the motivation for research 118
6.3 Objectives 119
6.4 Description of the growth centres programme 124
6.5 Theory and model 125
6.6 Description of variables and data 127
6.7 Results from the estimation of the unemployment rate 130
6.8 Estimation for GCs 133
6.9 Concluding remarks 138
7 Firm Location Decisions and Their Impact on Local Economies:
Evidence from India’s Growth Centres 139
7.1 Introduction and motivation 139
7.2 Objectives 139
7.3 Field visits to GCs 140
7.4 Summary of GCs visited 153
7.5 Impact of GC (infrastructure), and tax incentives
on firm location 154
Contents ix
7.6 The impact of GC firms on local labour markets 157
7.7 The export orientation of firms 159
7.8 Corporate social responsibility 161
7.9 Firm-level implications 162
7.10 Growth-centre-level implications 164
7.11 Concluding remarks 166
Part IV Lessons Learned
8 Lessons Learned from the United States and India 169
8.1 Introduction 169
8.2 Lessons for the United States 171
8.3 Lessons for India 173
8.4 Is the American experience relevant for India? 177
8.5 Can the corporate sector help? 183
8.6 Concluding remarks 184
Notes 185
References 204
Index 210