Center for Economics and the Environment: Policy Series
According to the Missouri Department of Economic Development (DED), the Missouri Quality Jobs Program (MQJP) will create 118 new jobs by 2020 for each $1 million dollars in tax credits awarded under the program. The claimed sources of these job gains are the direct increase in employment at the firms receiving the credits, and indirect increases at other firms due to spinoff and multiplier effects. Unfortunately, the DED’s estimates for these effects are based more on faith than on evidence. First, the DED rather naively assumes that all of the job gains at the firms receiving tax credits occur only because of the credits. Second, the DED’s projections of spinoff and multiplier effects are generated with a forecasting model that is incapable of an accurate accounting of negative substitution effects, such as the fact that many of the new jobs will be filled by people who are already employed. This paper summarizes new estimates of the employment effects of the MQJP using the actual, rather than the assumed, experience of local economies. What these estimates show is that after an initial net increase in employment following the authorization of tax credits, the net effect on employment becomes negative by the second year after authorization: Job gains in the county receiving the tax credits simply came at the expense of neighboring counties, which tend to lose more jobs than a recipient county gains. Finally, by the fourth year after authorization, the only statistically significant effects of the tax credits are job losses in neighboring counties.
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Wall, Howard J., "The Missouri Quality Jobs Program: Rearranging the Deck Chairs (And Throwing Some Overboard)" (2017). Center for Applied Economics. 21.