Producing drama: a comparison of film tax incentives to alternative uses

ABSTRACT

Incentive packages are popular tools for economic development. However, development projects are often considered in isolation without an analysis of opportunity costs. In this study, we use an intuitive framework for comparing projects and weigh alternate projects against North Carolina’s film incentive programme. The results indicate that there are substantial differences in the economic impact of the projects we consider in this study. Our results suggest that policy decisions by governments and economic development officials should weigh a potential project against alternative uses in order to optimize the use of incentives.

KEYWORDS:

• Incentives
• film
• regional impact
• local economic development

JEL CLASSIFICATION:

• H25
• H71
• R15
• R58

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ A grant programme of $10 million replaced the approximately $60 million per year tax credit programme before being expanded to $30 million per year. Replacing the refundable tax credits with a grant programme shifted the budgetary uncertainty from the state to production companies.

² These models, theoretically, can be constructed using available industry data but IMPLAN provides the matrices and user interface for United States-based analysis.

³ Alternative rebate schemes were modelled with only minor differences.

⁴ Employment figures for Quintiles are translated to operations expenditures using the Implan modelling programme.

⁵ As we acknowledge in the conclusion, economic impacts are for a single year. Thus, the duration of a project is not considered. Since, some projects such as Apple, Quintiles and Continental tire locate to a state for decades, it is likely that film-incentive projects would be even less favourable if duration is considered.

⁶ A more complete analysis of tax rebates should consider changes in tax rates in a CGE model. Our analysis uses tax rebates to hold tax rates constant.