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People, Places, and Public Policy: Some Simple Welfare Economics of Local Economic Development Programs

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Author Info

  • Patrick Kline

    (Department of Economics, University of California, Berkeley, California 94720
    National Bureau of Economic Research, Cambridge, Massachusetts 02138)

  • Enrico Moretti

    ()
    (Department of Economics, University of California, Berkeley, California 94720
    National Bureau of Economic Research, Cambridge, Massachusetts 02138)

Abstract

Most countries exhibit large and persistent geographical differences in wages, income, and unemployment rates. A growing class of place-based policies attempts to address these differences through public investments and subsidies that target disadvantaged neighborhoods, cities, or regions. Place-based policies have the potential to profoundly affect the location of economic activity, along with the wages, employment, and industry mix of communities. These programs are widespread in the United States and throughout the world but have only recently been studied closely by economists. We consider the following questions: Who benefits from place-based interventions? Do the national benefits outweigh the costs? What sorts of interventions are most likely to be effective? To study these questions, we develop a simple spatial equilibrium model designed to characterize the welfare effects of place-based policies on the local and the national economy. Using this model, we critically evaluate the economic rationales for place-based policies and assess the latest evidence on their effects. We conclude with some lessons for policy and directions for future research.

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Bibliographic Info

Article provided by Annual Reviews in its journal Annual Review of Economics.

Volume (Year): 6 (2014)
Issue (Month): 1 (08)
Pages: 629-662

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Handle: RePEc:anr:reveco:v:6:y:2014:p:629-662

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Keywords: place-based policies; spatial equilibrium; taxes; subsidies;

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References

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Cited by:
  1. David Neumark & Helen Simpson, 2014. "Place-Based Policies," NBER Working Papers 20049, National Bureau of Economic Research, Inc.
  2. Berger, Thor & Enflo, Kerstin, 2014. "Locomotives of Local Growth: The Short- and Long-Term Impact of Railroads in Sweden," Lund Papers in Economic History 132, Department of Economic History, Lund University.
  3. Raj Chetty & Nathaniel Hendren & Patrick Kline & Emmanuel Saez, 2014. "Where is the Land of Opportunity? The Geography of Intergenerational Mobility in the United States," NBER Working Papers 19843, National Bureau of Economic Research, Inc.

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