There is also recent evidence that suggests, whether or not they “work” to attract business, governments that rely on incentives may face negative outcomes. A 2010 study, based on an analysis of national surveys of 700 to 1,000 local governments from 1994, 1999, and 2004 that tracked the use of business incentives over time, found that governments that rely most heavily on incentives may face more intergovernmental competition, stagnating or declining economies, and lower tax bases. For such governments, business incentives may contribute to a cycle of destructive competition.
