“What may look like economic growth on the surface ends up being, upon closer scrutiny, an expensive exercise in the rearrangement of existing business activity.”
Kansas Policy Institute has released a report examing economic development in Wichita. Titled “Perspectives on Economic Development Incentives and Economic Growth in Wichita,” it presents much information specific to Wichita, and specifically two STAR bond districts: Riverwalk and K-96/Greenwich Road. There is also material on economics and economic development in general.
The main takeaway, according to KPI, is “… two of Wichita’s leading development projects, driven by economic development incentives, did not improve job creation.” Instead, the report concludes: “To summarize, and to reiterate, two prominent government-incentivized economic development projects do not show evidence of promoting net-new economic growth. At best, the projects redirected or redefined growth that would have happened without the subsidized intervention into the natural flow of commerce within the City of Wichita.”
The report was written by Arthur P. Hall, Ph.D., who is the founding Director of the Brandmeyer Center for Applied Economics at the University of Kansas School of Business. A press release announcing the paper is at Wichita’s Key STAR Bonds Didn’t Create New Jobs. It holds a link to the full report.
KPI president James Franko said, “The research aims to help the Wichita community understand the limits of incentive-driven development as we hope for a post-pandemic recovery and evaluate flagship development such as Century II.”
One difficulty in performing this type of analysis is access to data. Franko noted, “The access to this data is in desperate need of reform. It’s troubling that a more thorough analysis of other incentives is all but impossible. We should be judging every taxpayer dollar spent on actual outcomes, not simply the aspirations of those asking for the money.”
Of note, a conclusion made by Hall, the author, is consistent with his earlier findings, which is that new firms are the dominant driver of growth:
Nevertheless, the “big take-away” still holds for the Wichita metro area (using the firm-level data). Without the birth of new firms, Wichita would lose jobs in many more years than it would gain jobs from older firms represented in the data: New firm entry (age-zero firms) plays a dominant role in the on-going process of job creation. In other words, economic development is inherently a trial-and-error process; a numbers game that occasionally produces a break-away business that drives regional economic growth.
In other work, Hall has explained that new firms are distinct from small businesses.
This is an important work. Over coming weeks I’ll explore the report, its data, and its recommendations in more detail.