Economic growth is a major concern for state governments. One method that states use to spur economic growth is recruiting firms to relocate or expand within their state. Headlines and press releases from high–profile recruitment cases suggest that states compete with each other to recruit firms. The primary question in this dissertation is whether states compete to recruit firms. A unique panel data set that captures a state’s firm recruitment effort now provides the opportunity to answer this question. A variety of econometric methods (2SLS, MLE, and GS2SLS–GMM) isolate the spatial interdependence effect, and the empirical results show states do compete with each other to recruit firms. Another question answered in this dissertation is whether it matters how researchers measure a state’s effort to recruit firms. The results reveal that it is important to capture only spending related to firm recruitment, as other measures provide fundamentally different results. In addition, this dissertation tests for the nature of rivalry between states and shows that states compete with other states that are economically or demographically similar. The results of competition are not only robust, but large in magnitude as well. States are very responsive to their rival’s effort to recruit firms. Can states stop spending on firm recruitment? If they do, the other states will capture their potential firms–thus the competition to recruit firms does not seem likely to end soon.

This thesis evaluates the practice of subsidizing entertainment projects as economic development strategy through a case study of the American Airlines Arena (AAA). Subsidy proponents argued that it would generate new tax revenue and jobs, and enhance the city’s image and pride. This rationale neglects factors that mitigate the economic impact of arenas and fails to consider the social costs. The AAA subsidy is evaluated using a cost-benefit method that has been underutilized in academic research. The economic impact is analyzed by estimating the fiscal return on the public’s investment and the number and quality of new jobs created. The social costs are considered in light of Miami’s economic development history and the policy implications are discussed. The AAA subsidy results in hundreds of millions of dollars in losses over the term of the public-private partnership and created a negligible number of low quality jobs. Furthermore, the AAA subsidy may have exacerbated relations between residents and leaders by prioritizing the leisure spending of visitors over the needs of inner city residents.