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Mercatus Center: Amazon HQ2 Is the Only Competition Where the Losers Are Winners

December 23, 2018
By Michael Farren and Anne Philpot

'[C]ities and states are throwing their money away when they court Amazon’s favor through subsidies.''

The competition between 238 North American cities for Amazon's HQ2 sparked a bidding war. Despite arguments in support of economic development subsidies, both theory and experience suggest that cities and states are throwing their money away when they court Amazon’s favor through subsidies. Even subsidies worth billions of dollars are unlikely to sway Amazon’s decision. Worse, these kinds of targeted economic development incentives fail to produce economic growth.

There are more important factors than tax incentives and direct subsidies, e.g. the presence of a skilled workforce, local cost of living, access to transportation, and synergies with other industries. Over the long term, these factors can lead to far greater growth than a multi-billion dollar offer.