Municipal Fiscal Health and Tax Abatement Policy

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Abstract
Much attention in the urban economic development literature has focused on the relative merits of various economic development techniques and incentives. Less work has been done regarding why certain techniques are favored over others. In a study of 87 Michigan cities, this article explores the determinants of municipal tax abatement policy. Findings support the hypothesis that cities with growing economies tend to offer higher levels of tax abatements to promote further growth. Political factors such as governmental structure and competitiveness of elections are also important. The findings also suggest that commercial and industrial tax abatement policies are different, with commercial abatement levels being less easily explained

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