Evaluation Matrix - Operating Costs

Examples	Type of Evaluation / Measures	Results	Lessons Learned / Caveats
SUBSIDIES AND INCENTIVES (see STRATEGIES AND TOOLS)
Incentives' role in site location	Survey of 950 Michigan companies. Companies chosen randomly from a membership database of the Michigan Chamber of Commerce.	Among 34 factors affecting location decision, the highest ranked was the city's general business climate and attitude towards industry. Financial inducements were ranked fourth.
Incentives' role in site location	Reviewed regression studies.	Location incentives, such as property tax abatement, make some difference to state and local economic growth. Also, subsidies may encourage an expansion of national employment.	Competition among state and local governments may enhance the efficiency of the U.S. economy.
Influence of property tax abatements	Regression study.	Tax abatement on manufacturing property helps recruit or retain business but increasing the number or magnitude of the abatement will not continue to grow the manufacturing base.	Tax abatements have negative secondary effects including decline in value of local homes, declining government expenditures per capita, and increase in rate of user charges.

Incentives' role in site location	Hypothetical firm model.	Incentives accentuate basic tax differences. Small differences in labor and other costs outweigh large differences in taxes and incentives.	Neither tax incentives nor non-tax incentives offset the effects of the basic state-local tax systems

Effectiveness of firm-specific incentives provided by Industrial Development Agencies (IDAs) in NY	Case study of IDAs' bonding activities between 1987 and 1991.	Total tax losses exceeded $1.3 billion. Little evidence to suggest IDAs encourage firms to relocate, remain or expand within the state.	States considering the use of firm-specific tax incentives to spur economic growth and create jobs should look for other methods.
Enterprise zones (in eight states)	Comparison of enterprise zone to the city in which it is located.	Tax incentives were offset by higher costs, including insurance, transportation and access to raw materials. No significant change in growth rates in zones in comparison to the city as a whole.	By itself, a typical enterprise zone is unable to adequately provide the necessary factors for business growth. The impact of zone incentives on location was only significant for small businesses.
Enterprise zone programs	Review of 21 studies covering enterprise zone programs across the country.	Found little evidence of program success.	Lack of effective planning may be an important missing element in enterprise zone programs.
Enterprise zone program in New Jersey	Case study examining changes in employment and real estate value.	No evidence of job growth or increased real estate values.
Enterprise zones in Illinois	Study of 68 enterprise zones	Large net benefits.	Caveat: study assumed that all employment generated in the zones was attributable to program incentives.
Enterprise zones in California. Performance of 13 zones between 1986 and 1990.	Study used a shift-share analysis of employment changes.	All employment growth is explained by countywide growth and industrial mix. There is little evidence that the enterprise zones strengthened economically sluggish neighborhoods.
Enterprise zone in Louisville	Examined forgone tax and employment changes	Significant costs and modest benefits. Number of jobs and number of employed zone residents fell, although the rest of the county experienced growth.	Unable to precisely determine costs and benefits of the program.
Targeted Jobs Tax Credit	Comparison of earnings and labor force participation of program participants and a comparable group.	Found substantial earnings gains for participants and gains exceeded program costs. Participants more likely to be employed and evidence suggested gains are long-term.
BUSINESS ASSISTANCE (see STRATEGIES AND TOOLS)
Business Incubators; analysis of 50 incubators	Focus groups of incubator managers, stakeholders and graduate firms.	Business incubators are an effective educational tool; they assist new business survival and growth and create jobs.	Criticism: Most incubators are not financially self-sustaining. 40 of the 50 incubators analyzed did not break even.
Business incubators	Case study measured job creation, product innovation, new business starts and local location after graduation.	Job creation per firm is small (10), but increased over time.	Incubators are long-term economic development strategy. Evaluations should address both short- and long-run impacts.
Assistance to small and medium- size manufacturers in New York; the New York Manufacturing Extension Partnership (MEP)	Evaluation conducted by a quasi-experimental design comparing performance of MEP clients with similar companies.	Participating companies changed important business and manufacturing processes, improved performance and increased value added. Over a two-year period, 510-1,920 jobs were created and additional $30-110 million of value added was created.
Assistance to small and medium-size manufacturers in Pennsylvania; Pennsylvania's Industrial Resource Centers (IRCs)	Evaluation based on comparing participating companies and similar firms.	IRC clients increased labor productivity and contributed to an increase in gross state product. IRC added $120 million to state revenues. IRC return on state investment was 22:1.
Assistance to small and medium-size companies; Ohio Edison Technology Centers	Economic impact analysis of over 1,500 projects undertaken by seven centers over the 1994-98 period. Measures include client-company cost savings, employment gains and increased sales.	Participating firms realized $297 million of cost savings and increased sales of $709 million due to improvement associated with the centers. The centers created 4,628 jobs in Ohio and disposable income increased by $195 million annually.	Analysis conducted on all centers combined. Centers are located throughout the state and each assists different industries.
State support of technology pioneering firms	In-depth case studies of four companies.	The companies were successful and state programs were instrumental to their success by subsidizing their use of university resources and making direct equity investments.	Financial return on equity investments may provide important benefits to the state. Focusing on employment gains is a shortsighted method to measure success.
Promotion of technological innovation in Pennsylvania; the Ben Franklin Partnership (BPF)	Evaluation based on in-depth case studies; client-reported impact; and estimates of value added, employment and tax revenues generated by the program.	Over a seven-year period, BFP resulted in 21,800 additional jobs in client firms, with jobs paying salaries 45 percent higher than the average state salary. Additional 24,500 jobs were created throughout the economy. The state collected additional $168 million in tax revenues. Rate of return was $14 for every one dollar of public investment.	BFP is critical in the early stages of company development by providing financing and technical expertise. Clients developed new products, built management teams, developed production capacity, identified new markets and increased sales and profitability.
Trade Adjustment Assistance Program (TAA), administered by The Economic Development Administration of the U.S. Department of Commerce	Evaluation compared changes in employment and sales for companies assisted by TAA centers to changes in eligible companies that declined TAA assistance.	Benefits for assisted companies include: higher survival rates (84 percent versus 71 percent), added employment (4.2 percent versus decline of 5.3 percent), sales growth (34 percent versus 16 percent). For each dollar invested through TAA, $87 in sales was generated.	Program success is due to: extensive assistance at a low cost to firm, participating firms investing their own money and time in their recovery, program provided analysis of firm's strengths and weaknesses. Caveats: Too much of TAA budget is spent on eligibility versus assistance and there is a long backlog in getting assistance.