September 1, 2009 11:59AM

Solid Analysis of Michigan’s ‘Economic Development’ Bureaucracy

Michael LaFaive at the Mackinac Center of Policy Analysis in Michigan is doing excellent work exposing the state’s “economic development” bureaucracy for the press release economics smokescreen that it is. Along with his colleague James Hohman, Michael takes a thorough look at the Michigan Economic Development Corporation in a new study that anyone interested in the issue of state subsidies to businesses should find informative. In fact, I’d like to see other state‐​based organizations (as well as the local press) conduct similar analyses of the “economic development” bureaucracies in their back yards. I suspect the findings will be very similar.

From the executive summary:

MEGA [Michigan Economic Growth Authority] is the MEDC’s flagship tax credit vehicle for “creating” jobs…To analyze MEGA’s impact in greater detail, the Mackinac Center commissioned an analysis of the program from Michael Hicks, a Ph.D. economist at Ball State University…Hicks was able to find a statistical relationship between MEGA manufacturing tax credits and county manufacturing employment, but the relationship was negative. Hicks reports that from 2001 to 2007, every $1 million in MEGA manufacturing tax credits awarded in a county was associated with the loss of 95 county manufacturing jobs. While the statistical model cannot imply causation, it does strongly indicate that MEGA credits are not working to improve manufacturing employment.