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State and local economic development efforts have grown during the last three decades in the United States. Some public incentives for companies may be effective, including those for high unemployment areas; others may be wasteful, especially if they retain corporations that merely threaten to leave. As companies increasingly expect incentives, however, governments find themselves in a ‘race to the bottom’– the only way to remain competitive is to offer more. Having identified arguments for and against incentives, this paper considers the prospects for addressing wasteful competition, including, in the absence of Congressional action, the US Supreme Court's application of the Commerce Clause to strike down incentives that discriminate against interstate commerce. A review of a lawsuit challenging the constitutionality of incentives for the DaimlerChrysler Toledo Jeep plant finds that the Commerce Clause is not a solution for wasteful competition. Another model to consider is the European Union's regulation of incentives. [ABSTRACT FROM AUTHOR]

In 1996, Chrysler announced plans to build a replacement plant within 50 miles of its existing Toledo Jeep facilities. In theory, this presented an opportunity for alternatives to expensive ‘all or nothing’ individual competition; in practice, Toledo and other governments in the northwest Ohio/southeast Michigan region entered into the usual cutthroat contest when transnational corporations solicit incentive offers from across the United States. Chrysler's desire to remain within the region provides a unique context for analysing the opportunities and challenges associated with regional co-operation as an alternative to individual competition. In investigating the extent to which localities can co-operate and reduce wasteful incentives, this paper also identifies how the opportunities for such co-operation are limited. The research highlights the need to better incorporate this kind of region – without internal political coherence despite locational proximity – into conceptualisations and empirical analyses of regional co-operation, particularly with respect to issues of scale and conflict. [ABSTRACT FROM AUTHOR]

This paper examines the effects of state economic development incentives on the growth of 366 Ohio manufacturing and nonmanufacturing establishments that launched major expansions between 1993 and 1995. Growth is measured as the actual employment change that occurred in these establishments and as the employment growth announced when expansions were launched. Empirical findings indicate that incentives have very little (or even a negative) effect on actual growth and they have a substantial positive effect on announced growth. Findings also suggest that establishments that received incentives overestimated their announced employment targets more than establishments that did not receive incentives. [ABSTRACT FROM AUTHOR]