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

In: The Millennial City: Classic Readings on U.S. Urban Policy



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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Suggested Citation

  • Timothy J. Bartik, 1999. "Federal Policy Toward State and Local Economic Development in the 1990s," Book chapters authored by Upjohn Institute researchers,in: RD Norton (ed.), The Millennial City: Classic Readings on U.S. Urban Policy, volume 12, pages 235-251 W.E. Upjohn Institute for Employment Research.
  • Handle: RePEc:upj:uchaps:tjbjai1999

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    References listed on IDEAS

    1. LaLonde, Robert J, 1986. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," American Economic Review, American Economic Association, vol. 76(4), pages 604-620, September.
    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 225-246, May.
    3. 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.
    4. Papke, Leslie E., 1994. "Tax policy and urban development : Evidence from the Indiana enterprise zone program," Journal of Public Economics, Elsevier, vol. 54(1), pages 37-49, May.
    5. 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.
    6. Rod Cross, 2000. "Hysteresis and Emu," Metroeconomica, Wiley Blackwell, vol. 51(4), pages 367-379, November.
    7. Alicia H. Munnell, 1990. "How does public infrastructure affect regional economic performance?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 34, pages 69-112.
    8. 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.
    9. 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.
    10. Harry J. Holzer, 1991. "The Spatial Mismatch Hypothesis: What Has the Evidence Shown?," Urban Studies, Urban Studies Journal Limited, vol. 28(1), pages 105-122, February.
    11. 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.
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    Cited by:

    1. Véronique Le Gallo & Nicolas Marceau, 1999. "Intervention Centrale en matière de Finances Locales," CIRANO Project Reports 1999rp-07, CIRANO.

    More about this item


    local economic development; jobs; productivity; federal policy;

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes


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