Policy Research

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

Timothy Bartik

Summary

The working paper argues that local economic development policies can be analyzed and rigorously evaluated in ways to ensure a comprehensive understanding of their local economic outcomes. Small and medium-sized enterprises (SME’s) can be evaluated via experiments. These experiments would selectively chose SME’s to target with marketing strategies, while the other SME’s would still be eligible, but not receive specialized target marketing. Experimental efforts can also be used in distressed local areas, focusing the scarce resources on one local area over another. A selective policy of this nature could be evaluated citing economic outcomes from the two areas. When an experiment is not feasible, data is not available or experimenting is not feasible, statistical analyses can be used to analyze differences in similarities in economic outcomes between various groups is due to local economic development policies, which have no effect. Bartik further argues that these methods of evaluating policies need to go beyond the effects of business growth and include the outcomes on the general public.

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Policy Implications

Economic development policies have been effective in improving SME local business performances via training, information, and consulting services. However, policies in distressed areas, like enterprise zones, are usually ineffective unless the policy offsets the economic disadvantages of that zone. Additionally, export-based firms, like manufacturers, usually partake in programs that include tax breaks, infrastructure, worker training and expansion of facilities. These polices/programs costs state and local governments in the US about $20-30 billion annually. Evaluating economic development policies is not only important because of the large sums of money spent annually, but also because they are one of the most important functions of state and local governments.