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Do state corporate tax incentives create jobs? Quasi-experimental evidence from the entertainment industry (Thom, 2019)

Absence of conflict of interest. 

Citation

Thom, M. (2019). Do state corporate tax incentives create jobs? Quasi-experimental evidence from the entertainment industry. State and Local Government Review, 51(2), 92-103. [Louisiana]

Highlights

  • The study’s objective was to examine the impact of the motion picture incentive (MPI) program on employment in the motion picture industry. The authors investigated similar research questions for four other states, the profiles of which can be found here:

  • The study used an interrupted time series design to compare changes in employment before and after the MPI program was implemented. Data came from the Quarterly Census of Economics and Wages (QCEW) and the Louisiana Office of Entertainment Industry Development.  

  • The study suggested that there was a positive relationship between MPI program implementation and the average annual percentage point change in employment in the motion picture industry in Louisiana over time. There was no evidence of an immediate impact in the annual change in employment in the first year of the program compared to the average annual change in the 11 prior years. 

  • The quality of causal evidence presented in this report is low because other time-varying factors could have influenced the outcome. This means we are not confident that the estimated effects are attributable to the MPI program; other factors are likely to have contributed.

Intervention Examined

Motion Picture Incentive (MPI) program

Features of the Intervention

Tax incentives specific to the motion picture industry began in the late-1990s and early-2000s but are part of a broader context of location-specific economic development incentives that began over a century ago. More than 30 states have an MPI program that offers corporate tax incentives and other services to encourage film and television production in their state. MPI programs target employment tied to the production of motion pictures, television programs and commercials, and videos. This study focused on MPI programs in states that offer particularly large MPI tax expenditures. Louisiana enacted an MPI program in 2002 and, between 2002 and 2017, devoted $2.29 billion to this incentive program, the second most of any state. 

Features of the Study

The study used an interrupted time series design to compare changes in employment before and after the MPI program was implemented. The intervention time period is 2002–2017, the 16 years following the enactment of Louisiana’s MPI program. The comparison time period is the 11 years prior to MPI enactment: 1991–2001. 

Data comes from the Quarterly Census of Economics and Wages (QCEW) and the Louisiana Office of Entertainment Industry Development. The author used a statistical model to compare the annual motion picture industry employment change before and after MPI program implementation, focusing on the immediate change and the average change over time. The statistical model controlled for some changes in state-specific factors like the average wages in the motion picture industry in Louisiana and some competitive factors like changes in other states’ MPI tax expenditures

Findings

Employment

  • The study suggested that there was a positive relationship between the MPI program and the average annual percentage point change in employment in the motion picture industry over time but that there was not a significant impact of the MPI program the first year after implementation compared to the average annual change observed in the previous 11 years. 

Considerations for Interpreting the Findings

The annual change in employment in the motion picture industry in Louisiana did not follow a stable trend prior to implementation of the MPI program. Since the MPI program was only introduced at one point in time and was not introduced by the study author, we cannot be certain that the timing of the program was unrelated to other contextual factors that might also have affected employment in the motion picture industry. Additionally, the author cautions that these findings should be interpreted with caution because fewer years of data were available pre-intervention than post-intervention which could affect the estimation model.  

Causal Evidence Rating

The quality of causal evidence presented in this report is low because other time-varying factors could have influenced the outcome. This means we are not confident that the estimated effects are attributable to the MPI program; other factors are likely to have contributed.

Reviewed by CLEAR

January 2023