Which Places Should Place-Based Policy Target? Heterogeneity in Local Amenity Externalities

56 Pages Posted: 25 Oct 2017 Last revised: 6 May 2018

Ian Hoffman

Stanford University - Department of Economics

Evan Mast

Upjohn Institute

Date Written: April 30, 2018

Abstract

Place-based policy could improve efficiency if it targets areas with large amenity or agglomeration externalities. We begin by using a Census-updating instrument to show that increased federal spending in a county and the associated economic stimulus have substantial amenity externalities on average. We then employ two machine learning algorithms to conduct a data-driven search for heterogeneity in this effect and find that it is meaningfully larger in economically struggling counties. This suggests heterogeneity in amenity externalities works in favor of policies targeting struggling areas and should be considered in evaluations of specific place-based programs.

Keywords: place-based policies, amenities, spatial equilibrium, machine learning

JEL Classification: R10, R13, R23

Suggested Citation

Hoffman, Ian and Mast, Evan, Which Places Should Place-Based Policy Target? Heterogeneity in Local Amenity Externalities (April 30, 2018). Available at SSRN: https://ssrn.com/abstract=3059137 or http://dx.doi.org/10.2139/ssrn.3059137

Ian Hoffman

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
STANFORD, CA 94305-6072
United States

Evan Mast (Contact Author)

Upjohn Institute ( email )

300 South Westnedge Avenue
Kalamazoo, MI 49007-4686
United States

HOME PAGE: http://https://sites.google.com/site/evanemast/home

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