Called the “Snooki subsidy,” the firm that produced MTV’s “Jersey Shore” just received a $420,000 tax credit from the NJ Economic Development Authority. The purpose? New Jersey hopes to encourage business investment. The problem? Snooki.

The Economic Lesson

The controversy, though, also extends far beyond Snooki. It takes us to questions about state finance and economic development.

Citing budget problems, NJ Governor Christie suspended his state’s Development Authority tax credit program in 2010. And, according to the Wall Street Journal, certain states have had to deal with film company expense fraud and problems when firms resell tax credit vouchers. On the other hand, described here in econlife, producing Law & Order in NYC created a substantial ripple of spending.

The bottom line? Generating extra revenue and encouraging economic development is more complex than it appears.

The Economic Question: Explain a hypothetical ripple of spending that film production could initiate.