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

Patrick Kline and Enrico Moretti

Annual Review of Economics, 2014, vol. 6, issue 1, 629-662

Abstract: Most countries exhibit large and persistent geographical differences in wages, income, and unemployment rates. A growing class of place-based policies attempts 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 United States 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.

Keywords: place-based policies; spatial equilibrium; taxes; subsidies (search for similar items in EconPapers)
JEL-codes: H2 J2 R1 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (276)

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Related works:
Working Paper: People, Places and Public Policy: Some Simple Welfare Economics of Local Economic Development Programs (2013)
Working Paper: People, Places and Public Policy: Some Simple Welfare Economics of Local Economic Development Programs (2013)
Working Paper: People, Places and Public Policy: Some Simple Welfare Economics of Local Economic Development Programs (2013)
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