Working Paper: NBER ID: w19659
Authors: Patrick Kline; Enrico Moretti
Abstract: Most countries exhibit large and persistent geographical differences in wages, income and unemployment rates. A growing class of "place based" policies attempt 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 U.S. 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: No keywords provided
JEL Codes: H1; H2; H3; H4; H7; J0; R0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| place-based policies (R28) | location of economic activity (R32) |
| place-based policies (R28) | wages (J31) |
| place-based policies (R28) | employment (J68) |
| place-based policies (R28) | industry mix (L69) |
| place-based policies (R28) | local economic conditions (R11) |
| worker mobility (J62) | welfare effects of place-based policies (J68) |
| housing supply elasticity (R21) | welfare effects of place-based policies (J68) |
| place-based policies (R28) | land rents (R21) |
| welfare effects of place-based policies (J68) | unintended consequences (increased rents, deadweight losses) (D62) |
| subsidies on labor demand (J23) | impact varies based on type of intervention and local market conditions (F69) |