The Economics of Place-Making Policies

96 Pages Posted: 15 Nov 2008  

Edward L. Glaeser

Harvard University - John F. Kennedy School of Government, Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

Joshua D. Gottlieb

University of British Columbia (UBC) - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: November 10, 2008

Abstract

Should the national government undertake policies aimed at strengthening the economies of particular localities or regions? Agglomeration economies and human capital spillovers suggest that such policies could enhance welfare. However, the mere existence of agglomeration externalities does not indicate which places should be subsidized. Without a better understanding of nonlinearities in these externalities, any government spatial policy is as likely to reduce as to increase welfare. Transportation spending has historically done much to make or break particular places, but current transportation spending subsidizes low-income, low-density places where agglomeration effects are likely to be weakest. Most large-scale place-oriented policies have had little discernable impact. Some targeted policies such as Empowerment Zones seem to have an effect but are expensive relative to their achievements. The greatest promise for a national place-based policy lies in impeding the tendency of highly productive areas to restrict their own growth through restrictions on land use.

Suggested Citation

Glaeser, Edward L. and Gottlieb, Joshua D., The Economics of Place-Making Policies (November 10, 2008). Harvard Institute of Economic Research Discussion Paper No. 2166. Available at SSRN: https://ssrn.com/abstract=1299046 or http://dx.doi.org/10.2139/ssrn.1299046

Edward L. Glaeser (Contact Author)

Harvard University - John F. Kennedy School of Government, Department of Economics ( email )

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