Which Places Should Place-Based Policy Target? Heterogeneity in Local Amenity Externalities
56 Pages Posted: 25 Oct 2017 Last revised: 6 May 2018
Date Written: April 30, 2018
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: Suggested Citation