The Mercatus Center explains why Amazon chose where it did for its HQ2(s) — and what lessons cities need to draw from it.
Many people may think taxpayer-funded incentives give an edge in attracting business. They don’t. Instead, companies like Amazon mostly look for (1) a skilled workforce and (2) a pleasant place where their workers would want to live.
If that sounds awfully familiar, it’s because my post yesterday had research results of the 14 things corporate executives said were more important to improving the state’s business climate. The top result was a skilled workforce, followed by low regulations, taxes, and costs of living.
Amazon’s leadership was clear about this. … They were looking for a major city with established tech talent all along [and] probably had a general idea of where it was going to move a long time ago. Perhaps this included a handful of other candidates; places like Austin, or Boston, or Toronto. Amazon maintained the illusion of competition so that cities would offer more incentives than they otherwise would.
No surprise there. At the start of this process I warned that Amazon was notorious for rent-seeking and had just made a “continentwide request for proposals for government incentives.”
The subsidies are a sweetener, not a deciding factor. If they were, Amazon would have chosen Newark, NJ or Montgomery County, MD as its new home. These locations offered over $7 billion in incentives each, and are barely ten miles from the chosen sites in New York and Arlington, VA.
Nor were subsidies the deciding factor for Amazon’s Nashville investment, as Music City offered a comparatively measly package. Still, Nashville needn’t have offered anything at all, because it was already a naturally attractive candidate.
Again, nothing new here. As I wrote last week,
Still, research suggests that economic incentives are unlikely to influence corporate relocations. They tend to be pot sweeteners after the fact for a business move made for much more important business reasons.
Mercatus cuts to the chase:
The question of how cities can attract top firms is really: how to attract top talent. And how can cities attract top talent? They can become desirable places to live.
Well, how do they do that? Mercatus offers suggestions for ” thoughtful urbanism, innovation in public spaces, and affordability,” which will also sound familiar in these parts:
- accommodate transportation diversity without favoritism, letting transportation choices develop naturally
- relax zoning laws to allow more mixed-use development, flexibility, and innovation
- allow flexibility and choice in policy models — including education— rather than forcing options