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What Are the Different Types of Economic Development Incentives?

Esther Ejim
Esther Ejim

Economic development incentives are offered by governments to select categories of businesses based on the perceived value of the business to the economy of the region. For the most part, economic development incentives are offered to companies as a sort of lure, thus “incentive,” to establish the physical location of the company in the jurisdiction. Some of these incentives include tax credits, tax exemptions, grants, energy discounts and tax increment financing.

Some jurisdictions may offer sales and tax exemptions to companies that are willing to move their physical location to the area. These companies must also fulfill other requirements, which may include the creation of a minimum number of jobs as well as other commitments in the form of capital expenditure. The tax exemptions are usually on delineated types of purchases.

Some jurisdictions may offer sales and tax exemptions to companies that are willing to move their physical location to the area.
Some jurisdictions may offer sales and tax exemptions to companies that are willing to move their physical location to the area.

Some of the factors that determine the types of companies that are most likely to receive economic development grants are aspects like the number of jobs the company will create, desired industries like solar energy and green energy producers, and the competition for the services created by the company. Corporate income tax credits are usually granted to those companies that create a specified number of new jobs and that also contribute to the economic development of the region in some other form. This may include making capital investments, such as the construction of physical business infrastructure.

Developing a region's economy may involve the construction of new commercial spaces.
Developing a region's economy may involve the construction of new commercial spaces.

Other forms of economic development incentives may be in the form of infrastructure grants or soft loans. These financial incentives are granted to some companies for projects. Such endeavors may include street lighting and paving or creating access roads.

Job creation grants are offered to those companies who create a set number of jobs in the jurisdiction in question. The amount of money depends on the jurisdiction, and it is also applicable to those companies that make capital investments in the community or jurisdiction. This grant may also be given at a federal or municipal level.

Some locations might be considered as being in the first stage of economic growth and development, with limited use of technology.
Some locations might be considered as being in the first stage of economic growth and development, with limited use of technology.

Training grants are economic development incentives that are given to companies as a partial reimbursement for the money spent on the salaries and materials used in training new employees. This type of economic development incentive is important, because such training contributes significantly to the economic development of a region. These trained employees improve the quality of the available workforce in the region. Employees who are trained will also continue to contribute to the development of the region, even if the company folds or relocates.

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    • Some jurisdictions may offer sales and tax exemptions to companies that are willing to move their physical location to the area.
      By: michaeljung
      Some jurisdictions may offer sales and tax exemptions to companies that are willing to move their physical location to the area.
    • Developing a region's economy may involve the construction of new commercial spaces.
      By: Sam Spiro
      Developing a region's economy may involve the construction of new commercial spaces.
    • Some locations might be considered as being in the first stage of economic growth and development, with limited use of technology.
      By: francoisloubser
      Some locations might be considered as being in the first stage of economic growth and development, with limited use of technology.