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Estimating the Benefits of Job Creation from Local Investment Subsidies

Department of Town & Country Planning at the University of Newcastle upon Tyne

This paper reviews the application of project appraisal techniques to analysing the cost-effectiveness of local investment subsidies (advance factory building). Cost per job measures are shown to be dependent upon the method of assessing the number of jobs created, and the assumptions used in evaluating Exchequer as well as social costs and benefits. If realistic probabilities are adopted about the likelihood of previously unemployed persons obtaining a job other than in the advance factories, then such local investment subsidies are not economically viable in Exchequer terms. Local investment subsidies may be justified on cost-benefit grounds, but even by this criterion, the number of subsidy-created relative to subsidy-diverted jobs is crucial to the decision.

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