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Is Subsidizing Film Production Counterproductive?

This week, JLF’s Director of Regulatory Studies, Jon Sanders, published a research brief examining a recent study conducted by economics professor, Dr. John Charles Bradbury. The study, published by Western Carolina University’s Center for the Study of Free Enterprise, titled “What Do Film Incentives Mean for the North Carolina Economy?” seeks to discover what impact, if any, film incentives have on the N.C. Economy. According to Sanders, the results are not promising:

Bradbury looks at the academic literature on state film incentives and their various economic impacts. For example, a state’s return on investment through taxes. If it is positive, it would mean “each dollar spent on film subsidies generated more than a dollar for state government.” That would indicate the incentive was having a stimulating effect on the state’s economy (but it would still be unknown how well the economy would do without the wealth transfer). Nevertheless, as Bradbury showed, research was consistently in finding negative returns (most far less than a dollar) in film subsidies.

These losses were not small either. One study found North Carolina lost 78 cents per dollar spent on film incentives. Dr. Bradbury’s study did something different, though. According to Sanders:

Bradbury set up a counterfactual analysis to analyze “how the state economy might have performed absent its film incentive.” While this analysis conformed with the state’s economy in the years prior to the state’s adoption of film subsidies, it diverged afterward, with North Carolina’s actual economic performance falling below the no-film-incentives projection.

What does that mean? Bradbury explained, “The comparison suggests that North Carolina’s economy was not improved by its film incentives and that it might be worse off.”

Due to these losses, among other reasons, Sanders recommends calling it quits on film incentives:

As we recommended in our Policy Position on film grants, the best approach is to “End the film production grant program” and “Let the state’s significant, across-the-board pro-growth reforms attract outside film productions, as they do for long-term business enterprises.”

Read the full brief here. Learn more about film grants here.

Brenee Goforth / Marketing and Communications Associate

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