...legislators return to industrial-planning incentives.

It seems that every fresh crop of Arizona legislators--no matter how conservative--is tempted to try to centrally plan the state economy via targeted incentives. Bob Robb summarizes the empirical results of states' recent efforts at smokestack chasing:

Have incentive states bucked the trend? No. In fact, they haven't even done better than equal-playing-field states.

Over the last five years, incentive states have lost 16 percent of their manufacturing jobs, while equal-playing-field states have lost 14 percent. Over a ten- and twenty-year period, the performance of all the states has been about the same. Incentive states and equal-playing-field states both lost about 30 percent of their manufacturing jobs.

Nor do incentive states have a significantly higher concentration of manufacturing jobs. Manufacturing provides 9.1 percent of overall employment in incentive states vs. 8.5 percent in equal-playing-field states.

The incentives game is supposed to lead to a more diverse and stable economy that produces better paying jobs. But over the most recent 10-year period for which data is available from the Bureau of Economic Analysis (1998-2008), average wage growth in incentive states actually lagged behind that of equal-playing-field states, 44 percent to 47 percent. And they have a higher average current unemployment rate, 8.9 percent compared to 8.3 percent.

So, engaging in economic favoritism does not, in fact, produce a more diverse, stable and better-paying economy.

Robb's full article is here:

http://www.azcentral.com/members/Blog/RobertRobb/73398