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Evaluating the Impacts of Local Economic Development Policies On Local Economic Outcomes: What Has Been Done and What is Doable?

This paper argues that more rigorous evaluations of local economic development policies are feasible. Programs that aid selected small firms can be rigorously evaluated using an experimental approach, without excluding firms from assistance, by randomly assigning some firms to receive more intense marketing efforts by the program. Programs that aid distressed local areas can be rigorously evaluated by random assignment of the program among eligible distressed areas. If an experiment cannot be done, a variety of statistical approaches can be used to compare firms or areas that use the program with comparison groups of firms or areas that do not use the program. These statistical analyses should be supplemented with surveys and focus groups with businesses that use the program, which give some insight into why the program works or doesn't work. Evaluations should go beyond the effects of programs on business growth to effects on local fiscal health and the earnings of the unemployed. Evaluations using rigorous approaches suggest that programs providing information services to small manufacturers are frequently effective. Programs targeting distressed areas are ineffective unless great resources are used over a lengthy period.

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Paper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number 03-89.

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Date of creation: Nov 2002
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Handle: RePEc:upj:weupjo:03-89
Note: A revised version of this paper appears in Evaluating Local Economic and Employment Development: How to Assess What Works among Programmes and Policies. 2004. Paris: OECD.
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  1. Timothy J. Bartik, 1999. "The Market Failure Approach to Regional Economic Development Policy," Book chapters authored by Upjohn Institute researchers, in: John P. Blair & Laura A. Reese (ed.), Readings in Urban Economics: Issues and Public Policy, pages 14-24 W.E. Upjohn Institute for Employment Research.
  2. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-75, March.
  3. Leslie E. Papke, 1993. "What Do We Know about Enterprise Zones?," NBER Working Papers 4251, National Bureau of Economic Research, Inc.
  4. Hines, James R, Jr, 1996. "Altered States: Taxes and the Location of Foreign Direct Investment in America," American Economic Review, American Economic Association, vol. 86(5), pages 1076-94, December.
  5. Robert T Greenbaum & John B Engberg, 1998. "The Impact Of State Urban Enterprise Zones On Business Outcomes," Working Papers 98-20, Center for Economic Studies, U.S. Census Bureau.
  6. Kenneth E. Poole & George A. Erickcek & Donalad T. Iannone & Nancy McCrea & Pofen Lin Salem, 1999. "Evaluating Business Development Incentives," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number gaw1999, March.
  7. Petra E. Todd & Jeffrey A. Smith, 2001. "Reconciling Conflicting Evidence on the Performance of Propensity-Score Matching Methods," American Economic Review, American Economic Association, vol. 91(2), pages 112-118, May.
  8. Michael Wasylenko, 1997. "Taxation and economic development: the state of the economic literature," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 37-52.
  9. Murnane, Richard J & Newstead, Stuart & Olsen, Randall J, 1985. "Comparing Public and Private Schools: The Puzzling Role of Selectivity Bias," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 23-35, January.
  10. Charles E. McLure, Jr. & Walter Hellerstein, 2002. "Does Sales-only Apportionment of Corporate Income Violate the GATT?," NBER Working Papers 9060, National Bureau of Economic Research, Inc.
  11. Ronald S. Jarmin, 1999. "Evaluating the impact of manufacturing extension on productivity growth," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 18(1), pages 99-119.
  12. Timothy J. Bartik & Peter K. Eisinger & George A. Erickcek, 2003. "Economic Development Policy in Michigan," Book chapters authored by Upjohn Institute researchers, in: Charles L. Ballard & Paul N. courant & Douglas C. Drake & Ronald C. Fisher & Elisabeth R. Gerber (ed.), Michigan at the Millennium: A Benchmark and Analysis of Its Fiscal and Economic Structure, pages 279-297 W.E. Upjohn Institute for Employment Research.
  13. Joshua Angrist & Alan B. Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," NBER Working Papers 8456, National Bureau of Economic Research, Inc.
  14. Bruce D. Meyer, 1994. "Natural and Quasi- Experiments in Economics," NBER Technical Working Papers 0170, National Bureau of Economic Research, Inc.
  15. William H. Oakland & William A. Testa, 2000. "The Benefit Principle as a Preferred Approach to Taxing Business in the Midwest," Economic Development Quarterly, , vol. 14(2), pages 154-164, May.
  16. Timothy J. Bartik & Richard D. Bingham, 1995. "Can Economic Development Programs Be Evaluated?," Upjohn Working Papers and Journal Articles 95-29, W.E. Upjohn Institute for Employment Research.
  17. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, vol. 64(4), pages 605-54, October.
  18. Edward Vytlacil & James J. Heckman, 2001. "Policy-Relevant Treatment Effects," American Economic Review, American Economic Association, vol. 91(2), pages 107-111, May.
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