Does Pennsylvania's Redevelopment Assistance Capital Program Develop Its Economy?

Abstract

Several states administer grant programs that provide funding to businesses that relocate to the state or expand existing operations within the state. This study analyzes one such program administered by Pennsylvania, the Redevelopment Assistance Capital Program (RACP). Over the life of the program nearly half of the grants awarded have gone to the two most populous counties in Pennsylvania, Allegheny and Philadelphia. Using grant data from 2010, I find that RACP grants do have a small effect on subsequent employment growth at the county level. However, this result does not reflect net employment growth at the state level. Additional evidence and economic theory are used to show that grant programs like the RACP spatially and intertemporally reallocate economic activity rather than create long-term economic growth.

Keywords: Subsidies, Spatial Competition, Regional Development

JEL Classification: H25, H32, R11