Do entrepreneur-focused facility incentives create economic impacts? Evidence from Indiana

As a component of a benefit-cost analysis into the efficacy of publicly funded facility incentives, the purpose of this paper is to examine the county-wide impact of business incubators, makerspaces and co-working spaces on employment, proprietor’s employment and the average wage per job. The period under analysis is 1971 through 2015 across Indiana’s 92 counties.

Using a unique data set on facility incentives in Indiana, a spatial panel model, which includes a unique identification strategy to account for underlying conditions identified as a source of incubator success in earlier studies, is developed.

This study finds no statistically significant impact of these facilities on total employment or average wage per job during this period. There is a statistically meaningful impact of co-working spaces on proprietor’s employment, but the effect is an economically insignificant one-time increase of 2.3 jobs in the typical county, which can be interpreted as shifting employment from traditional employment to proprietorship employment.

This is the first empirical estimate of the contribution of modern facility incentives on measures of local economic activity.