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Federal Policy Towards State and Local Economic Development in the 1990s

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  • Timothy J. Bartik

    ()
    (W.E. Upjohn Institute for Employment Research)

Abstract

This paper suggests new federal policies towards state and local economic development assistance to business. I argue that there is some evidence that these programs can be effective in encouraging business growth and helping the unemployed. But state and local governments do not have the right incentives to adequately pursue national goals through economic development programs. State and local governments are not inclined to do quality evaluations of their programs and tend to favor business attraction programs over programs that might increase U.S. business productivity. In addition, it is unclear whether economic development efforts are most vigorously pursued by economically depressed areas, in which the national social benefits of economic development are the greatest. A new federal policy towards economic development should provide partial federal support for state and local economic development programs that encourage business productivity. The funding should be coupled with requirements for rigorous outside evaluation, comparing the performance of assisted and unassisted firms. Finally, our system of fiscal federalism should be reformed to provide greater resources for economically depressed areas. This assistance will allow these areas to be more economically competitive.

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Bibliographic Info

Paper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number 93-17.

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Date of creation: Mar 1993
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Handle: RePEc:upj:weupjo:93-17

Note: A revised version of this paper appears in R. Ebel and R. Norton, eds,. 1993. Research in Urban Economics: (Vol. 9) Structuring Direct Aid: People versus Places. Greenwich, CT: JAI Press, pp. 161-178.
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Keywords: state; local; economic; development; Bartik;

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  1. David T. Ellwood, 1986. "The Spatial Mismatch Hypothesis: Are There Teenage Jobs Missing in the Ghetto?," NBER Chapters, in: The Black Youth Employment Crisis, pages 147-190 National Bureau of Economic Research, Inc.
  2. Jones, Stephen R G, 1989. "Reservation Wages and the Cost of Unemployment," Economica, London School of Economics and Political Science, vol. 56(222), pages 225-46, May.
  3. LaLonde, Robert J, 1986. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," American Economic Review, American Economic Association, vol. 76(4), pages 604-20, September.
  4. 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.
  5. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  6. Heckman, J.J. & Hotz, V.J., 1988. "Choosing Among Alternative Nonexperimental Methods For Estimating The Impact Of Social Programs: The Case Of Manpower Training," University of Chicago - Economics Research Center 88-12, Chicago - Economics Research Center.
  7. Thomas Fraker & Rebecca Maynard, 1987. "The Adequacy of Comparison Group Designs for Evaluations of Employment-Related Programs," Journal of Human Resources, University of Wisconsin Press, vol. 22(2), pages 194-227.
  8. Alicia H. Munnell & Leah M. Cook, 1990. "How does public infrastructure affect regional economic performance?," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 11-33.
  9. Rod Cross, 2000. "Hysteresis and Emu," Metroeconomica, Wiley Blackwell, vol. 51(4), pages 367-379, November.
  10. Timothy J. Bartik, 2004. "Economic Development," Book chapters authored by Upjohn Institute researchers, in: J. Richard Aronson & Eli Schwartz (ed.), Managememnt Policies in Local Government Finance, pages 355-390 W.E. Upjohn Institute for Employment Research.
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