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            SResearch Service

Amazon's HQ2 and Economic Development:

Perspectives and Policy Options

March 8,   2019

In February 2019, facing political and public opposition, Amazon canceled the New York portion of its
planned second headquarters (HQ2). Originally announced in November 2018, HQ2 was going to be split
between the Northern Virginia suburbs of Washington, DC, and Long Island City, NY, which Amazon
claimed would each gain as many as 25,000 direct jobs as a result. According to its cancelation
announcement, Amazon plans to proceed with its Virginia site, along with a smaller third site in Nashville
also announced last November that Amazon suggested would generate 5,000 additional jobs. Amazon's
announcement followed an approximately year-long process in which over 238 localities competed to
attract HQ2.
Overall, reactions to Amazon's initial announcement were mixed, reflecting contrasting views of
economic development prioritizing economic growth on the one hand, and social welfare on the other.
While proponents of the Virginia and New York bids celebrated the expected economic and job growth,
detractors claimed the value of robust economic incentives-nearly $3 billion in New York, about $750
million in Virginia, and hundreds of millions in additional indirect incentives-would be better used to
address poverty and economic inequality. Amazon's selections also reinforced concerns over mega-
regions like New York City and Washington, DC, attracting outsized economic gains while other regions
plateaued or declined. The debate over HQ2 has led to questions over the justifiability of economic
incentives for large corporations like Amazon, how those incentives play out in competition between
states and localities, and the role of economic development policies in general.
Growth- and social welfare-oriented economic development strategies provide different policy options
and potential outcomes. While a growth-oriented view tends to focus on top-line macroeconomic
performance, a social welfare approach often emphasizes ameliorating inequality and poverty. However,
these goals are not necessarily incompatible and may be complementary. Reconciling these pnionities pose
challenges and opportunities to Congress. With numerous congressional statements about HQ2 and its
perceived economic development viability, this Insight explores how HQ2 reflects certain elements of
both approaches to economic development, and provides information on its broader implications for
federal approaches to economic development policy.

                                                                Congressional Research Service

Prepared for Members and
Committees of Congress

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