This report investigates the possible use of government subsidies for firms locating in urban poverty areas as a means of improving employment opportunities for the urban disadvantaged. Arguments in favor of incentives, emphasizing the need to avoid wasting manpower and to protect developing industries while inducing further industrialization, are weighed against the inherent problems involved with incentives. An incentive program operates inefficiently to the extent that it cannot discriminate between firms requiring the incentive to relocate and those willing to move without the subsidy. The report concludes that subsidies should be as selective as possible, and that transportation and other locational problems should be considered as an alternative use for these incentive funds. (BH)