For well over 20 years, economic development has been a major preoccupation for most state and local governments. Around the country, billions of public dollars are spent each year to subsidize private companies so that they will either locate or expand their businesses in hometown markets. Recent studies of this approach to economic development, however, make clear that the so-called economic bidding war among state and local governments is actually counterproductive. At least from a national perspective, no new jobs or businesses are created; jobs and businesses are simply located or relocated to the highest bidder. The bidding war is at best a zero-sum game that distorts market outcomes and diverts public funds from more productive investments in economic development.
