A recent analysis of data center development in Texas reveals that these facilities generally do not generate measurable gains in local employment or income. The research, conducted by Michael J. Hicks of Ball State University, examined county-level economic data across the state, comparing regions with newly constructed data centers to those without. Focus was placed on sectors expected to benefit most: construction, information technology, and professional services. Results showed no significant change in job numbers or wages attributable to data center projects.
One exception emerged for facilities exceeding 100,000 square feet. These larger installations appeared to correlate with modest growth in technical and engineering roles, possibly due to their use in artificial intelligence operations, which demand more on-site personnel than standard cloud infrastructure. However, the effect was inconsistent across locations and not strong enough to draw firm conclusions.
The study also evaluated fiscal incentives, such as property and sales tax exemptions, commonly offered to attract data centers. Findings indicate these subsidies lack justification, given the absence of broad economic benefits. Since the operational phase requires minimal staffing and much of the facility’s value lies in imported hardware rather than local construction, the ripple effects on communities are negligible.
Additionally, the research explored whether residential electricity prices were affected between 2010 and 2023. No upward trend linked to data center activity was found. In fact, electricity expenditures as a share of household budgets remain near historic lows, even when adjusted for inflation.
While data centers are increasingly vital to national digital infrastructure, the rush to incentivize them—exemplified by Indiana’s 2019–2020 policy shifts—has led to substantial taxpayer costs without clear returns. The author warns against adopting similar strategies without rigorous causal analysis. Economic development decisions should be grounded in evidence, not trends, and local governments should retain control over incentive programs rather than relying on statewide mandates.
Future developments may shift these dynamics, especially as AI-driven facilities grow in scale and complexity. For now, however, the evidence suggests that offering large tax breaks for data centers is unlikely to yield meaningful community benefits.
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Hicks Commentary: A Data Center Study
This column was originally published on the Ball State University Center for Business and Economic Research Weekly Commentary blog. n nBy Michael J. Hicks n nOctober 5, 2025 n nData centers have almost no local economic effects, with one possible exception. n nThat’s the result of my recent study examining the effects of data centers on Texas employment and incomes. Texas provides an ideal case study because it offers both property tax abatements and sales tax exemptions for data centers, it posts transparent data on tax incentives, and it experienced the data center rush before other states. n nTo understand the economic impact, I measured employment in counties with new data centers against those without, focusing on total employment and the sectors most likely affected: information, construction, and professional and technical services. n nThe results were pretty clear. n nNo data center had a measurable effect on employment. To double check that finding, we performed a second type of analysis designed to detect whether jobs come early, as in a construction phase, or later, once the data center is operating. n nThere was no evidence that data centers led to more employment or incomes. There’s just no effect at all, which is not terribly surprising. After all, these are not complex buildings. Much of the value comes from purchased equipment, not the structure. Also, there’s very little labor used to operate them after they’ve been built. n nThis Texas study offers data center proponents little evidence to justify attracting them in the name of economic development. But there is one potential exception. n nLarge data centers — those over 100,000 square feet — did appear to influence professional and technical employment. The average effect was reasonably strong, but many places experienced no effect. This finding suggests some future benefits, but it is far from definitive. It is difficult to know precisely how these very large data centers would differ from smaller ones. n nThe likeliest explanation is that smaller data centers support cloud computing, while larger ones are used for artificial intelligence. The AI facilities might bring with them technicians and engineering or computing staff in larger numbers. That would be a hopeful sign for the local effect of data centers, but it is a very tentative hope. n nOne finding was very clear. Statewide tax incentives for data centers are unjustifiable. It shouldn’t take an economic study to determine this. Large fiscal incentives for businesses without an employment effect have always been an especially dubious venture. n nThere’s no real support for local incentives either. But, in the rare case when there are economic development benefits, it will be very localized. Again, there is low probability of these incentives ever paying off, but that should be a local choice, not something taxpayers across Texas (or Indiana) should bear. n nIt’s also worth noting that, as part of this study, I tested the effect of data centers on electricity prices and price changes for residential consumers from 2010-2023. Again, there was no evidence that data centers led to higher residential electricity prices. n nIndeed, the share of the family budget Americans spend on electricity has never been smaller than it is today. Any claims that data centers are driving higher electricity prices likely fail on a number of facts, not least of which is that inflation-adjusted electricity prices are low by historical standards. n nOf course, this study only evaluated jobs and electricity prices through 2023 or 2024. There could be changes in the future, so it is best to keep an open mind. n nDespite these results, data centers are important to our economy today and will grow in importance as data storage and the computing power of AI becomes more critical to household, government and business applications. n nThe big takeaway from this research isn’t so much that data centers aren’t a local economic benefit. I think even a modicum of judgment would make that clear. The lesson is that the rush to attract the newest fad blinded legislators, economic developers and county and city councils across the country. n nTake Indiana, for example. In the coming weeks, the Indiana Economic Development Corp. is set to release a data center study. It’s worth reiterating: Any study that doesn’t attempt to assess the causal effect of data centers on local employment, wages and other economic measures is probably useless. n nThe IEDC’s work is unlikely to use rigorous experimental design — we don’t yet have enough variation in the location and timing of Indiana’s data centers to make such analysis possible. n nYet, Indiana’s first attempt at analysis comes more than five years after the state effectively gave the farm away to any new data center that wanted to move here. It’s part of the collapse of judgment that accompanied economic development policy in 2019 and 2020. n nThat failure cost Hoosier taxpayers billions of dollars and has saddled the Braun administration with many difficult choices. It is a case study on poor oversight, mission creep and a culture of accommodation to any business request for tax relief. In short, a very costly mistake. n nThe data center lesson should be simple. Do your homework on economic effects, be reluctant to give special tax deals and don’t wait until there’s a taxpayer rebellion to perform due diligence. Those are evergreen policy recommendations. n nMichael J. Hicks is professor of economics and the director of the Center for Business and Economic Research at Ball State University. He previously served on the faculty of the Air Force Institute of Technology’s Graduate School of Engineering and Management and at research centers at Marshall University and the University of Tennessee. His research interest is in state and local public finance and the effect of public policy on the location, composition, and size of economic activity. n nThe views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body. Also, the views and opinions expressed do not necessarily reflect the views of The Indiana Citizen or any other affiliated organization.