Table of Contents

1999
 

Volume One, Number 3

Symposium on State and Local Development Policy Competition

Richard C. Feiock, Editor

1. Development Policy Competition and Positive-Sum Growth: Incentive Competition and its Alternatives
   Richard Feiock
   
   This essay directly challenges the assumption that development competition is undesirable by examining how development policy can enhance social welfare. I address the desirability of development competition by demonstrating that the efficiency of development efforts depends upon the types of development programs employed and the context in which governments compete. After discussing the role of government policy competition in general, I examine incentive competition. I argue that, while development competition can lead to zero-sum outcomes, the zero-sum result is a special case. From this perspective, the social benefits resulting from development competition depend on the characteristics of the economic development market. I next examine three alternatives to conventional development strategies: institutional development, human capital development, and social capital development. After describing each of these approaches I argue that they have the potential to create positive sum gains for the states and communities that employ them.

2. Which Economic Development Policies Work?  Determinants of State Per Capita Income
   Paul Trogen
   
   Economic development policies add to state economic efficiency and welfare if they compensate manufacturing firms for the positive externalities they produce. Incentives which try to alter business behavior, but do not produce positive externalities greater than their costs may, however, distort the market-place and result in reduced state economic efficiency and welfare. This article reports the results of a pooled cross sectional time series analysis that was conducted to estimate the influence of different types of economic development policies on one measure of overall welfare, change in state per capita income, for the years 1979 through 1995. Results suggest state development policies which offer tax breaks to all manufacturing firms, and programs which offer state loans and loan guarantees for all manufacturing firms, are positively related to growth in state per capita income. Programs which attempt to elicit specific firm behavior, such as incentives for new investment and incentives to create jobs, were negatively related to growth in per capita income. "Demand" side entrepreneurial state policies had no significant influence on per capita personal income.

3. Accounting for State Economic Performance: A Time-Series Cross-Sectional Analysis of the Limits of State Economic Policy
   Allen Bronson Brierly and Robert Costello
   
   State capital, labor, and technological market conditions are important determinants of state economic performance, but these conditions should be considered exogenous variables because state government has only a marginal influence on the capital, labor, and technological resources within their political boundaries. Development and growth involve different tradeoffs, and therefore mixtures, of capital, labor, and technology across the American states. The production model specified in this paper accounts for both the direction and relative impacts of capital, labor, and technology on state economic development and state economic growth rates.

   Our time series regression estimations reval that increasing capital has a greater positive short-term impact on state development levels and growth rates, than increases in labor supply. Increases in labor and technology do not produce contemporaneous increases in state economic performance because these variables involve longer-term adjustments. The findings also suggest state economies were responsive to international energy price changes and national policy reforms in the 1970's and 1980's.

4. Measuring Local Economic Development Policy and the Influence of Economic Conditions
   Max Neiman and Kenneth Fernandez
   
   Based on a completed, large-scale study of suburban cities in Southern California (N=202) this paper reports on the existence and usefulness of measuring local economic development policy in various ways. The policy measures were derived from an extensive survey of local economic development officials. Comparisons between simple additive scales of total policy activity and additive scales derived from factor analysis are made. After comparing the results of regression analysis of local policies measured in several ways, it is concluded that in some instances explanations of local policies are best approached by measuring policy in fairly simple ways. In this case, our set of conventional independent variables explains the most amount of variation in the additive measure. Moreover, the patterns of findings do not alter in substantively important ways when the policy measure is altered. The most salient finding is that both poverty levels and average income were both negatively correlated with our policy measures. Further examination of income and poverty show empirical support for Goetz's uneven development hypothesis.

5. An Institutionalist Take on State Activism in Economic Development: A Theoretical System
   James J. Wilson
   
   This article explores theoretical aspects of state activism in economic development to address specific gaps in the literature. I content that state economic development is a complex and dynamic phenomenon which can not be adequately conceptualized nor modeled using ad hoc classification systems, taxonomies, nor conceptual frameworks. Instead, I propose a theoretical framework which has two principal governmental functions. Each function is defined by a typology of four policy types which are theoretically grounded and organized within an institutional framework. This theoretical system addresses the limitations of efforts to account for foundational economic determinants of state development and to assess both the linkages between policy types as well as the linkages between state economic development and institutions. The narrow and often competing perspectives of previous studies can present a distorted picture of state activism in economic development. This study seeks to present a clearer and comprehensive description of this phenomenon.