Policy Research

Why The Michigan Business Development Program Is More Effective than Typical Incentives

Timothy J. Bartik

Summary

This article covers the Michigan Business Development Program, a program to provide grants and loans to encourage investment. According to Upjohn research, the program boasts a 4-1 ratio of benefits to costs. 80% of benefits of the MBDP are from higher earnings per capita for residents. The article cites the program as being successful because of incentivized amount per job created, the incentives are front-loaded, and the incentives are aimed at firms that are effective at producing job growth outside of the directly incentivized firm.

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Policy Implications

Authors: Timothy J. Bartik Date: 5/7/2019 Type of Scholarship: X Journal Article Book Book Chapter Other Report Summary: This article covers the Michigan Business Development Program, a program to provide grants and loans to encourage investment. According to Upjohn research, the program boasts a 4-1 ratio of benefits to costs. 80% of benefits of the MBDP are from higher earnings per capita for residents. The article cites the program as being successful because of incentivized amount per job created, the incentives are front-loaded, and the incentives are aimed at firms that are effective at producing job growth outside of the directly incentivized firm. Policy Implications: Although the reflection section of the article is aimed more at lessons that other states can learn from MBDP, these are lessons that could be noted for Michigan’s other incentive programs. The cost of the incentive per job is low compared to many other states. A front-loaded approach to the program leads to diminishing returns on the dollar, so front loading it can lead to quick and effective job growth. The article mentions that this program is also more effective in Michigan compared to similar programs in other states because of the extensive network of manufacturing suppliers.