This dissertation examines the effects of tax and non-tax incentives on the economy, focusing on the behavior of local governments, labor market dynamics, and entrepreneurship choices in settings where institutional capacity, geographic location, and agglomeration forces play a critical role. The first chapter analyzes how U.S. local governments responded to the 2017 cap on the federal deductibility of state and local taxes (SALT). Using a difference-in-differences and event-study framework, I find that counties more exposed to the SALT cap increased property tax revenues without reducing expenditures, suggesting proactive fiscal adjustments to preserve service levels. The second chapter evaluates Colombia’s flagship industrial policy for cultural and creative industries (2018–2022). Leveraging administrative payroll data and quasi-experimental methods, I find that the policy increased firm creation and formal employment but had limited effects on wages and pension contributions. Its overall impact was constrained by the COVID-19 pandemic and a lack of policy continuity. The third chapter employs structural modeling to examine occupational choices between entrepreneurship and subsistence self-employment in Colombia. The results underscore the importance of wealth, education, and family background in fostering formal, growth-oriented entrepreneurship. Together, these essays contribute to our understanding of how fiscal policy and targeted incentives shape public finance and influence the behavior of individuals and firms across both high- and middle-income settings.