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

Authors

Timothy J. Bartik, W.E. Upjohn Institute for Employment ResearchFollow

Upjohn Author ORCID Identifier

https://orcid.org/0000-0002-6238-8181

Series

Upjohn Institute Working Paper No. 93-17

**Published Version**

In The Millennial City: Classic Readings on U.S. Urban Policy, R.D. Norton, ed. Stamford, CT: JAI Press Inc., 1999, pp. 235-251

DOI

10.17848/wp93-17

Issue Date

March 1993

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.

Subject Areas

ECONOMIC DEVELOPMENT; Local labor markets; Regional policy and planning; Business and tax incentives