Abstract
Examines the use and effectiveness of local economic development incentives designed to reduce the costs of doing business in a city, focusing on the case of metropolitan Detroit. Provides an overview of the types of local incentives employed in the Detroit metropolitan area and examines statistical evidence on a possible spatial mismatch in the area's labor market. Presents a model of a metropolitan area economy that explains differences in local employment rates, poverty rates, and manufacturing and commercial property tax bases, as well as differences in the use of local incentives, including property tax abatements, industrial development bonds, downtown development authorities, and tax increment finance authorities. Uses a modeling strategy that takes into account interrelationships between these variables and other causal factors. Estimates the model using data from 112 municipalities in metropolitan Detroit from the years 1977, 1982, 1987, and 1992. Uses the model to simulate what would happen if an average community in the Detroit metropolitan area increased its use of a local incentive over the period 1977 to 1992. Presents policy recommendations. Anderson is at the University of Nebraska, Lincoln. Wassmer is at California State University, Sacramento. Author and subject indexes.