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An obvious point stemming from these results is that an excellent economic strategy would be to lower taxes without cutting services -- if we could find a way to do that. Unfortunately, the experience of states that have adopted stringent tax limitations, like California and Massachusetts, tells us that in fact services do get cut substantially.

The way out of this dilemma is to increase the productivity of state and local governments. Determining exactly how to do this, of course, is not easy. Over the past several decades slow growth of government productivity has surely delayed growth in many other areas of the economy. But just as many private sector service industries have recently seen productivity grow because of increasingly effective use of information technology and improved business processes, similar benefits in state and local government productivity could occur if enough effort were devoted.

Another important lesson about local economic development relates to specific tax abatements for particular firms or plants. Today, nearly every state and the majority of municipalities provide at least some such incentives to some firms. We have already noted that the 'traditional' view of economists, at least until a decade ago, was that firm-specific incentives usually ended up being given to firms that had already decided to move there for other reasons. Certainly firms that decide to pick a particular location based on transport, labor force, and other grounds have an incentive to claim to local officials that they are actively considering other locations in hopes of getting a tax break. Many studies in the seventies and early eighties seemed to confirm this. Some recent research suggests, however, that, on the margin, while not as central to the location issue as labor force, input, transportation, and other issues, taxes can matter.

Unfortunately, many of the studies to date have focused on simply whether a measurable effect can be found, rather than on the magnitude of the effect, or its relationship to any benefit to the citizens of a state or region. Not all who study this topic agree with the new findings that suggest tax breaks can have some effect; and no one has yet shown that the net benefits of such policies can be positive.

An important related issue is whether the best way to attract firms is to give tax cuts to specific firms rather than to try to improve the business tax climate generally. It is also important to keep sight of the fact that one firm's tax cut is someone else's tax increase. In the long run, this could lead to firms leaving the region or to a failure to attract firms that are small or unsophisticated in bargaining with local officials.

Recent studies of the effects of general state development spending are mixed, at best. Most studies find no significant or economically meaningful effect; those that do suffer from an a本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。