According to a recent article from Techrepublic, the data center industry is growing rapidly due to more individuals and businesses moving operations to the cloud. In recent years, tech giants like Apple and Google have built large data centers in rural areas - including the North Carolina Piedmont - to keep up with increased cloud computing demand.
The new centers, however, usually do not bring large numbers of jobs, as some residents expect they will, according to Todd Cherry, director of theCenter for Economic Research and Policy Analysis at Appalachian State University.
"The data centers have been a natural fit in the foothills of North Carolina," said Cherry. "As the textile and furniture industries left, there was considerable electricity capacity to serve the data centers."
The underlying issue is that the state and local governments provide incentives such as tax breaks, land, infrastructure, and services, usually in a competitive bidding process with other governments trying to land the data center, Cherry said.
"The incentive packages can be quite outlandish—far exceeding any reasonable economic justification," Cherry said. "This is a form of what we call 'the winner's curse.' When governments engage in a competitive bidding process over an uncertain benefit, the one that wins is the one that overestimates the benefit."
This kind of competitive bidding to attract companies often becomes more of a political game than an economic development strategy, Cherry said. Instead of spending resources to fight for an existing company, a better economic development approach is to create new economic activity by investing in things like education, infrastructure, and research and development, Cherry said.
TechRepublic, part of the CBS Interactive business portfolio, is an online trade publication and social community for IT professionals, with advice on best practices and tools for the day-to-day needs of IT decision-makers.
Cherry's research focuses on public policy issues related to environmental challenges, energy resources and climate change. His research has been funded by the U.S. Environmental Protection Agency, U.S. Department of Energy, U.S. Department of Transportation, Norwegian Research Council, Appalachian Regional Council and NC Rural Center, among others.
About the Center for Economic Research and Policy Analysis
The Center for Economic Research and Policy Analysis aims to improve policy and decision-making by producing rigorous research and disseminating relevant information on current economic and policy issues. To that end, the center maintains research programs in the specific areas of economic development, environment and energy, and experimental economics. For more information, visit cerpa.appstate.edu.