The Political Economy of State Government Subsidy Adoption: The Case of Ethanol

Abstract

In this paper we examine the factors that determine the adoption of state economic development incentives in the ethanol industry. We compile data on the implementation dates for subsidies/tax credits for all states for years 1984-2007, a period that covers the complete emergence of the biofuel industry in the United States and that was characterized by the passage of a numerous of state-level subsidies and tax breaks aimed at increasing ethanol production. Using Cox proportional hazard regression analysis, we find that states are more likely to adopt ethanol subsidies when corn production is high, when corn prices are low and gasoline prices are high, when a state is affiliated with the National Corn Growers Association, when a check-off is present, and when state government is under the control of Democrats.

Fade to Black? Exploring Policy Enactment and Termination Through the Rise and Fall of State Tax Incentives for the Motion Picture Industry

“…Each event history analysis relies on a Cox proportional hazard model, which has been used to examine the diffusion of sex offender laws (Easterly, 2015), ethanol subsidies (Skidmore, Cotti, & Alm, 2013), and research and development tax credits (Miller & Richard, 2010). The Cox model does not assume a specific functional form for the likelihood of enactment or termination, known as the hazard rate.…”

Political Failures in Innovation Policy: A Cautionary Note

“…Since environmental problems are considered a pressing concern that require political action, environmental policies are susceptible to government failure. The promotion of biofuels, which feed into a narrative of cutting carbon emissions and reducing reliance on imported fuels, might have had more to do with politics than economic or environmental efficiency (Skidmore et al, 2013). The outcome of ethanol subsidies, as an efficient way to reduce emissions and consumption of fossil fuels, appears to be quite bleak (Pimentel, 2003;Hahn and Cecot, 2009).…”

Lights, Camera, Action: The Adoption of State Film Tax Credits

“…Boushey () notes that among the factors that affect the rate of diffusion are attributes of the policy itself—these include the salience, complexity, and level of public support for the associated policy issue. The diffusion of an economic policy can be due to policy adoption based on copying or competing behavior by neighboring states (Skidmore, Cotti, and Alm, ). We incorporate these forces into a theoretical framework of film production tax incentive program adoption.…”

“…Among the policy adoptions that have been considered are: state lotteries (Alm, McKee, Skidmore ; Berry and Berry ), tax amnesties (Le Borgne ), gasoline tax (Berry and Berry ), ethanol subsidies (Skidmore, Cotti, and Alm ), adoption of the personal income tax (Aidt and Jensen ), local option sales taxes (Burge and Piper ), fair employment legislation (Chen ), prepaid tuition and savings plans (Doyle, McLendon, and Hearn ), charter schools (Zhang and Yang ), term limits (Scott and Bell ), R&D investment tax credit (Miller and Richard ), and enterprise zones (Jolley ).…”