New York City Limits: The Case of Morgan Stanley

Abstract

In 1991, the New York investment bank, Morgan Stanley, announced that it was considering relocating its corporate headquarters from Manhattan to Stamford, Connecticut. New York City and New York State interceded to prevent a business they perceived as an anchor in the financial community from leaving. A deal was struck in which Morgan Stanley agreed to remain in New York City for ten years in exchange for a package of tax incentives worth $40 million. This paper explores the details surrounding the Morgan Stanley case. In addition, it explores how the comparative advantage of cities like New York has slowly been eroded. Finally, it seeks to explain why the states of New York, New Jersey, and Connecticut continue to use tax incentives to lure businesses away from one another despite the fact that they would be collectively better off if they agreed to stop the practice.