Recently, Toyota sought a plant location in the United States. The $800-million plant will employ 3000 workers, and numerous states offered Toyota generous investment incentives, hoping this would induce Toyota to select their state. The Commonwealth of Kentucky won this competition, but the price was high: the present value of the payments exceeds $125 million. The payment of investment incentives for the Toyota plant is not unique. In 1976 Pennsylvania paid $75 million to attract a Volkswagen plan,; Nissan, Honda, and Mazda received generous investment incentives when locating plants in the United States. And this bidding is not limited to states. To attract the headquarters of the Presbyterian Church (USA), with its 1300 jobs and $38 million annual payroll, civic leaders in Louisville, Kentucky, offered the church a warehouse and $6.2 million for renovation of the structure, bidding the church away from Kansas City, Missouri.' In this paper, we contend that this competition may result from the average cost pricing of publicly provided goods and services.2 When the marginal cost of providing a firm and its workers with public services is less than the tax revenue they generate, a government may offer the firm subsidies that reduce the distortions the average cost pricing of the public service creates. Thus, this competition for industry is not a zero-sum game where the subsidies are only transfers from the government to the firm. Rather, these subsidies may facilitate the efficient location of industry.

Evaluating the Worker Profiling and Reemployment Services System Using a Regression Discontinuity Approach by Dan A. Black, Jose Galdo and Jeffrey A. Smith. Published in volume 97, issue 2, pages 104-107 of American Economic Review, May 2007

We examine the effect of the Worker Profiling and Reemployment Services system. This program “profiles” Unemployment Insurance (UI) claimants to determine their probability of benefit exhaustion and then provides mandatory employment and training services to claimants with high predicted probabilities. Using a unique experimental design, we estimate that the program reduces mean weeks of UI benefit receipt by about 2.2 weeks, reduces mean UI benefits received by about $143, and increases subsequent earnings by over $1,050. Most of the effect results from a sharp increase in early UI exits in the treatment group relative to the control group.

The Great Migration-the massive migration of African Americans out of the rural South to largely urban locations in the North, Midwest, and West-was a landmark event in U.S. HISTORY: Our paper shows that this migration increased mortality of African Americans born in the early twentieth century South. This inference comes from an analysis that uses proximity of birthplace to railroad lines as an instrument for migration.