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

By Patrick M. Kline, Enrico Moretti. Social Science Research Network, 2014

522 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/87acedfa8a3425864ed3ba98eb6633df42b7536a

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Citations in the corpus

Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms (2016, unknown): “See Kline and Moretti (2014) for a model of agglomeration with a representative firm and Diamond (2012) for amenity-related agglomerations.”
Housing Constraints and Spatial Misallocation (2019, methodology): “Specifically, we follow Kline and Moretti (2014) and assume the joint distribution of jt is given by Fg( 1, . . . , N) = exp(− ∑N i −θ i ) where the parameter 1/θ governs the strength of idiosyncratic preferences for location and therefore the degree of labor mobility.”
Housing, urban growth and inequalities: The limits to deregulation and upzoning in reducing economic and spatial inequality (2019, background): “Along these lines, a host of academic papers (e.g. Ganong and Shoag, 2017; Gaubert, 2018; Glaeser and Gottlieb, 2008; Hsieh and Moretti, 2015, 2017; Ihlanfeldt, 2007; Katz and Rosen, 1987; Kline and Moretti, 2014; Quigley and Raphael, 2005; Saiz, 2010) have made a set of inter-linked claims:”
Urban-Rural Gaps in the Developing World: Does Internal Migration Offer Opportunities? (2020, result): “Conversely, those who do not migrate because of high costs—even if they might also experience large potential gains—will never help identify the urban coefficient in a regression that relies only on migrants for identification (Lagakos et al. forthcoming). There is clearly more work to be done to im”
Quantitative Spatial Economics (2017, unknown): “In the literature on local labor markets, many studies have examined the impact of local shocks and policy interventions on local employment (for reviews, see Moretti 2011a, Kline & Moretti 2014b, Neumark & Simpson 2015).”
Economic reforms and industrial policy in a panel of Chinese cities (2016, unknown): “Kline and Moretti (2014b) study the long-run e¤ects of place-based policies by focusing on a subsidy program in the U.S. that supported lagging regions.”
Evaluating State and Local Business Tax Incentives (2020, background): “After decades of skepticism (Glaeser and Gottlieb, 2008), there is now growing enthusiasm among many policymakers and academics for using place-based policies to address these regional disparities (Austin, Glaeser and Summers, 2018; Bartik, 2019b; Kline and Moretti, 2014).”