Do Tax Incentives Affect Business Location and Economic Development? Evidence from State Film Incentives

Abstract

for excellent research assistance. I am especially thankful to the John Randolph and Dora Haynes Foundation for generous funding through a dissertation fellowship, and to the National Institutes of Health and the RAND Corporation for funding under a postdoctoral training grant (5T32AG000244-23). The views expressed in this paper are my own and are not necessarily those of any funders. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Do Movie Production Incentives Generate Economic Development?

“…If many states offer incentives, then film companies ultimately end up filming in their desired location (where they would have located absent subsidies) with a significant subsidy. Button (2019) finds MPIs to be associated with increases in television series filming, but the effect is not evident for feature films or business establishments in the industry. The author also finds nonrobust evidence of small employment effects, and that MPIs do not have a strong ability to develop a significant film industry.…”

“…Button () finds MPIs to be associated with increases in television series filming, but the effect is not evident for feature films or business establishments in the industry. The author also finds nonrobust evidence of small employment effects, and that MPIs do not have a strong ability to develop a significant film industry.…”

“…Owens and Rennhoff (Forthcoming) uses a discrete choice model to examine film location decisions and finds that film incentives can attract movies to states; however, the impact depends on the type of incentive, studio characteristics, and geography. Similar to Button (), MPIs are not associated with creating a more permanent film industry. The authors use film budgets to conduct a cost‐benefit analysis for 2013 that reveals the return on investment from every state MPI program was negative, with average return per dollar of tax credit issued being 27 cents.…”

“…In reviewing the academic literature on MPIs, I identified some conflicts in MPI designations across sources. Film incentive designations were largely derived from Button (), which compiles the most comprehensive database of state MPIs to date, with detailed descriptions of program incentives and adoption dates. I reviewed all designations by searching media stories and government records of program enactments, making a few adjustments, which I note here.…”

“…I reviewed all designations by searching media stories and government records of program enactments, making a few adjustments, which I note here. California enacted tax credits in 2009, but Button () lists the implementation beginning in 2011. Idaho adopted a film incentive program in 2008; however, it was never funded and therefore is designated as not having an active MPI program for this study.…”