Can Business Incentives be Justified and what are the Implications for Efficiency versus Equity?
This article investigates whether Michigan’s (United States) Site Assessment Fund (SAF), a grant program designed to help make brownfield sites ‘redevelopment ready’, satisfies three criteria for justifying the use of business incentives by governments: They should (1) result in investments and job creation, (2) increase local public revenues, and (3) be directed to poorer populations. While all three criteria aim to increase economic efficiency, Criterion 3 also aims to address issues of equity. The study found that the program met all three criteria. Because ‘counterfactuals’ are difficult to control for, it cannot be ruled out that in the absence of incentives, more economically efficient outcomes for Criteria 1 and 2 might have been achieved. In meeting concerns about equity, the SAF program may have sacrificed economic efficiency. Policy makers have to decide whether concerns about equity are sufficient to justify incentives for brownfields redevelopment that may not be the most e
