| Article ID: | iaor20072683 |
| Country: | United States |
| Volume: | 18 |
| Issue: | 3 |
| Start Page Number: | 307 |
| End Page Number: | 350 |
| Publication Date: | Jan 2006 |
| Journal: | Journal of Public Budgeting, Accounting and Financial Management |
| Authors: | Miller Gerald J., Robbins Donijo |
| Keywords: | management, planning, government, politics, economics, statistics: empirical, simulation |
Local public officials rely on tax and non-tax incentive packages to develop their economies. No conclusive evidence supports the economic improvement incentives afford. We investigate, with an experimental approach, the political reasons public officials use tax incentives. The experiment uses simulation gaming to model local economic development as an auction, in that way permitting us to compare the impact that motives, goals and contexts have on outcomes. Our findings suggest that the majority of economic development competitors fall victim to the ‘winner's curse’ – overestimating and overbidding the potential payoff for business development.