Advanced Search
MyIDEAS: Login

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

Contents:

Author Info

  • Kline, Patrick

    ()
    (University of California, Berkeley)

  • Moretti, Enrico

    ()
    (University of California, Berkeley)

Abstract

Most countries exhibit large and persistent geographical differences in wages, income and unemployment rates. A growing class of "place based" policies attempt 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 U.S. 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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://ftp.iza.org/dp7735.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7735.

as in new window
Length: 46 pages
Date of creation: Nov 2013
Date of revision:
Handle: RePEc:iza:izadps:dp7735

Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information:
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:

Related research

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

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Matthew Freedman, 2013. "Targeted Business Incentives and Local Labor Markets," Journal of Human Resources, University of Wisconsin Press, vol. 48(2), pages 311-344.
  2. Rothstein, Jesse, 2011. "Unemployment Insurance and Job Search in the Great Recession," Institute for Research on Labor and Employment, Working Paper Series qt5611t356, Institute of Industrial Relations, UC Berkeley.
  3. Patrick Kline & Enrico Moretti, 2013. "Place Based Policies with Unemployment," NBER Working Papers 18758, National Bureau of Economic Research, Inc.
  4. Addison, John T. & Portugal, Pedro, 2004. "How does the unemployment insurance system shape the time profile of jobless duration?," Economics Letters, Elsevier, vol. 85(2), pages 229-234, November.
  5. Epifani, Paolo & Gancia, Gino A., 2005. "Trade, migration and regional unemployment," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 625-644, November.
  6. David Neumark & Jed Kolko, 2008. "Do Enterprise Zones Create Jobs? Evidence from California's Enterprise Zone Program," NBER Working Papers 14530, National Bureau of Economic Research, Inc.
  7. Molho, Ian, 2001. "Spatial Search, Migration and Regional Unemployment," Economica, London School of Economics and Political Science, vol. 68(270), pages 269-83, May.
  8. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
  9. Rauch James E., 1993. "Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities," Journal of Urban Economics, Elsevier, vol. 34(3), pages 380-400, November.
  10. Antonio Ciccone & Giovanni Peri, 2002. "Indentifying human capital externalities: Theory with an application to US cities," Economics Working Papers 611, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2005.
  11. Freedman, Matthew, 2012. "Teaching new markets old tricks: The effects of subsidized investment on low-income neighborhoods," Journal of Public Economics, Elsevier, vol. 96(11), pages 1000-1014.
  12. David Card & Francesco Devicienti & Agata Maida, 2014. "Rent-sharing, Holdup, and Wages: Evidence from Matched Panel Data," Review of Economic Studies, Oxford University Press, vol. 81(1), pages 84-111.
  13. David Card & Phillip B. Levine, 1998. "Extended Benefits and the Duration of UI Spells: Evidence from the New Jersey Extended Benefit Program," NBER Working Papers 6714, National Bureau of Economic Research, Inc.
  14. Raj Chetty, 2008. "Erratum: Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1197-1197, December.
  15. Edward L. Glaeser & Joshua D. Gottlieb, 2009. "The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States," Journal of Economic Literature, American Economic Association, vol. 47(4), pages 983-1028, December.
  16. Wang, Jin, 2013. "The economic impact of Special Economic Zones: Evidence from Chinese municipalities," Journal of Development Economics, Elsevier, vol. 101(C), pages 133-147.
  17. Stephanie Riegg Cellini & Fernando Ferreira & Jesse Rothstein, 2010. "The Value of School Facility Investments: Evidence from a Dynamic Regression Discontinuity Design," The Quarterly Journal of Economics, MIT Press, vol. 125(1), pages 215-261, February.
  18. David S. Lee, 1999. "WAGE INEQUALITY IN THE UNITED STATES DURING THE 1980s: RISING DISPERSION OR FALLING MINIMUM WAGE?," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 977-1023, August.
  19. Briant, Anthony & Lafourcade, Miren & Schmutz, Benoît, 2013. "Can Tax Breaks Beat Geography? Lessons from the French Enterprise Zone Experience," CEPREMAP Working Papers (Docweb) 1316, CEPREMAP.
  20. Stephen Redding & Daniel M. Sturm & Nikolaus Wolf, 2007. "History and Industry Location: Evidence from German Airports," CEP Discussion Papers dp0809, Centre for Economic Performance, LSE.
  21. Edward L. Glaeser & David C. Mare, 1994. "Cities and Skills," NBER Working Papers 4728, National Bureau of Economic Research, Inc.
  22. Robin Boadway & Katherine Cuff & Nicolas Marceau, 2004. "Agglomeration Effects and the Competition for Firms," International Tax and Public Finance, Springer, vol. 11(5), pages 623-645, 09.
  23. Hoyt Bleakley & Jeffrey Lin, 2012. "Portage and Path Dependence," The Quarterly Journal of Economics, Oxford University Press, vol. 127(2), pages 587-644.
  24. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  25. Acemoglu, Daron, 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," CEPR Discussion Papers 1707, C.E.P.R. Discussion Papers.
  26. Bondonio, Daniele & Engberg, John, 2000. "Enterprise zones and local employment: evidence from the states' programs," Regional Science and Urban Economics, Elsevier, vol. 30(5), pages 519-549, September.
  27. Michael Greenstone & Enrico Moretti, 2003. "Bidding for Industrial Plants: Does Winning a 'Million Dollar Plant' Increase Welfare?," NBER Working Papers 9844, National Bureau of Economic Research, Inc.
  28. Gallagher, Justin & Greenstone, Michael, 2007. "Does Hazardous Waste Matter? Evidence from the Housing Market and the Superfund Program," Working paper 134, Regulation2point0.
  29. Robert T. Greenbaum & John B. Engberg, 2004. "The impact of state enterprise zones on urban manufacturing establishments," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 23(2), pages 315-339.
  30. Paul Beaudry & David A. Green & Benjamin Sand, 2012. "Does Industrial Composition Matter for Wages? A Test of Search and Bargaining Theory," Econometrica, Econometric Society, vol. 80(3), pages 1063-1104, 05.
  31. Marshall, Alfred, 1890. "The Principles of Economics," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number marshall1890.
  32. Heckman, James J., 2000. "Policies to foster human capital," Research in Economics, Elsevier, vol. 54(1), pages 3-56, March.
  33. John Francis, 2009. "Agglomeration, job flows and unemployment," The Annals of Regional Science, Springer, vol. 43(1), pages 181-198, March.
  34. Adriana D. Kugler & Gilles Saint-Paul, 2004. "How Do Firing Costs Affect Worker Flows in a World with Adverse Selection?," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 553-584, July.
  35. Gobillon, Laurent & Magnac, Thierry & Selod, Harris, 2012. "Do Unemployed Workers Benefit from Enterprise Zones? The French Experience," IZA Discussion Papers 6357, Institute for the Study of Labor (IZA).
  36. Patrick Kline, 2010. "Place Based Policies, Heterogeneity, and Agglomeration," American Economic Review, American Economic Association, vol. 100(2), pages 383-87, May.
  37. Leslie E. Papke, 1991. "Tax Policy and Urban Development: Evidence From The Indiana Enterprise Zone Program," NBER Working Papers 3945, National Bureau of Economic Research, Inc.
  38. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  39. Chetty, Raj, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Scholarly Articles 9751256, Harvard University Department of Economics.
  40. Matias Busso & Jesse Gregory & Patrick Kline, 2011. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," Working Papers 11-07, Center for Economic Studies, U.S. Census Bureau.
  41. Donald R. Davis & David E. Weinstein, 2002. "Bones, Bombs, and Break Points: The Geography of Economic Activity," American Economic Review, American Economic Association, vol. 92(5), pages 1269-1289, December.
  42. David Albouy, 2009. "The Unequal Geographic Burden of Federal Taxation," Journal of Political Economy, University of Chicago Press, vol. 117(4), pages 635-667, 08.
  43. Edward L. Glaeser, 2001. "The Economics of Location-Based Tax Incentives," Harvard Institute of Economic Research Working Papers 1932, Harvard - Institute of Economic Research.
  44. Kenneth A. Couch & Douglas J. Besharov & David Neumark, 2013. "Spurring Job Creation in Response to Severe Recessions: Reconsidering Hiring Credits," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 32(1), pages 142-171, 01.
  45. Daniel A. Hartley, 2010. "Blowing it up and knocking it down: the effect of demolishing high concentration public housing on crime," Working Paper 1022, Federal Reserve Bank of Cleveland.
  46. Hamermesh, Daniel S, 1989. "Labor Demand and the Structure of Adjustment Costs," American Economic Review, American Economic Association, vol. 79(4), pages 674-89, September.
  47. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
  48. Krugman, Paul, 1987. "The narrow moving band, the Dutch disease, and the competitive consequences of Mrs. Thatcher : Notes on trade in the presence of dynamic scale economies," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 41-55, October.
  49. James E. Rauch, 1993. "Does History Matter Only When it Matters Little? The Case of City-Indu try Location," NBER Working Papers 4312, National Bureau of Economic Research, Inc.
  50. Ive MARX, 2001. "Job subsidies and cuts in employers' social security contributions: The verdict of empirical evaluation studies," International Labour Review, International Labour Organization, vol. 140(1), pages 69-83, 03.
  51. Daron Acemoglu & Robert Shimer, 1998. "Holdups and Efficiency with Search Frictions," Working papers 98-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  52. Boarnet, Marlon G. & Bogart, William T., 1996. "Enterprise Zones and Employment: Evidence from New Jersey," Journal of Urban Economics, Elsevier, vol. 40(2), pages 198-215, September.
  53. Nada Wasi & Michelle J. White, 2005. "Property Tax Limitations and Mobility: The Lock-in Effect of California's Proposition 13," NBER Working Papers 11108, National Bureau of Economic Research, Inc.
  54. Acemoglu, Daron, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 779-804, August.
  55. Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
  56. Mark D. Partridge & Dan S. Rickman & Hui Li, 2009. "Who Wins From Local Economic Development?," Economic Development Quarterly, , vol. 23(1), pages 13-27, February.
  57. Enrico Moretti, 2004. "Workers' Education, Spillovers, and Productivity: Evidence from Plant-Level Production Functions," American Economic Review, American Economic Association, vol. 94(3), pages 656-690, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. 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.
  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. David Neumark & Helen Simpson, 2014. "Place-Based Policies," NBER Working Papers 20049, National Bureau of Economic Research, Inc.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp7735. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.