The literature about tax incentive programs is extensive, but there is still no clear answer regarding the effectiveness of such programs, mainly because of conflicting results among studies. Furthermore, most of the analysis regarding incentives is limited to measuring effectiveness in terms of firms’ location decisions and job creation. Another potential impact of incentives relates to educational attainment of the population of the region offering the incentives. The lure of higher wages from foreign firms might entice individuals to increase their human capital. However, in regions with relatively high unemployment rates, this could create the conditions for brain drain, as skilled workers that are not able to find jobs select migration. We use data from Puerto Rico to demonstrate this phenomenon.
|Keywords:||Tax Incentives, Foreign Direct Investment, Skills Upgrading, Unemployment, Brain Drain|
Associate Professor, Economics Department, Robert Vance Academic Center 412, Central Connecticut State University, New Britain, CT, USA
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