Policy Tool Bundling

The choice of economic development incentives involves a complex system of political and economic considerations. Policy tools theory has largely focused on the individual characteristics of each particular tool and has not considered interactions among instruments or explained why multiple tools are used simultaneously in practice. Extant research has overlooked interdependence among policies and the fact that policies may serve as substitutes or compliments to each other. Building on theories of policy tools and policy diffusion, a theory of policy bundling is developed in this dissertation to explain why multiple tools are used in conjunction with one another to solve public problems. A diverse set of motivations and strategies are formed to explicate why bundling occur. The theory of policy tool bundling is empirically tested using panel data from the state of Georgia. The presence of policy tool bundling is assessed by modeling four economic incentives simultaneously with a multivariate probit model estimated using Bayesian methods. The results demonstrate that bundling is occurring between free or reduced cost land and expedited permitting and also between free or reduced cost land and industrial development bonds. No evidence of bundling was found between other incentives indicating that while policy bundling does occur in economic development, many of the observed relationships between policies are not strategic.