Masters Theses

Date of Award

3-1988

Degree Type

Thesis

Degree Name

Master of Science

Major

Planning

Major Professor

Joseph M. Prochaska

Abstract

State and local governments turned to tax-exempt industrial revenue bonds (IRBs) as a means of attracting and retaining jobs to their regions during the late 1970s and early 1980s. Although the legislative purpose of IRBs was to create jobs, few evaluative studies on IRB-based job creation exist.

Tennessee's IRB program, like most states, experienced rapid transformations in the amount and type of bonds issued between 1974 and 1982. Manufacturing issues were superseded by nonmanufacturing issues, and the job creation issue assumed new importance as federal and state regulations began affecting how IRBs could be used.

This study examined 841 Tennessee IRBs issued between 1974 and 1982, measuring net job change through examining Unemployment Insurance 202 (UI 202) records maintained by the Tennessee Department of Employment Security using rolling (annually) four year periods. Differences in total employment were measured by four analyses: region, industrial sector, project type, and size, using David Birch's job generation methodology, a standard accepted by most economists and planners. Measurements made were:

1. Net job change between years 0 and 3;

2. Capital utilization measuring net job change against total IRB dollars for sectorial, project and size analyses;

3. Shift-share measurements of statewide manufacturing and nonmanufacturing net job change compared with IRB totals.

Manufacturing issues accounted for a larger share of Tennessee's net-manufacturing job change. Nonmanufacturing issues had significantly lower shares of statewide net job change, suggesting IRBs produce proportionally more jobs in heavy industry as opposed to service and trade businesses.

Nearly 45 percent of all IRB financed net job change occurred in expansions of existing firms, and most job change occurred in establishments employing between 20 and 99 persons. Establishments employing 200-499 persons created more jobs per IRB dollar than smaller or larger establishments.

Durable manufacturers created more jobs per IRB dollar than other industrial sectors, followed by distribution. Although trade and service jobs are revolutionizing the state and national economy, their job creation ability is mixed. Many retailers studied reduced full-time employment four years after receiving IRB approval. Comparatively, durable employers tended to retain jobs, although their growth rates were slower than trade and service firms. New entries, firms entering Tennessee for the first time, held a slight margin over new projects in the project category.

Given these findings, Tennessee is best served by a manufacturing and export-oriented IRB policy. This policy should address the needs of existing firms while making affordable office and shop space for small businesses.

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