PLACE-BASED POLICIES | CODETERMINATION
On place-based and adaptable public policy
A recent report published by BROOKINGS INSTITUTE discusses the potential effectiveness of place-based policies for strengthening the economies of depressed areas. Co-authored by Harvard’s BENJAMIN AUSTIN, EDWARD GLAESER, and LAWRENCE H. SUMMERS, the report emphasizes that region-specific, flexible policies may best foster a nation-wide equilibrium:
"Traditionally, economists have been skeptical towards [place-based] policies because of a conviction that relief is best targeted towards poor people not poor places, because incomes in poor areas were converging towards incomes in rich areas anyway, and because of fears that favoring one location would impoverish another. This paper argues for reconsidering place-based policies ...
Indeed, even the most diehard opponent of place-based redistribution should see the logic of tailoring Federal policies to local labor market conditions. Standard social policy rules, like the Bailey (1976)—Chetty (2006) formula for unemployment insurance, depend on parameters that differ across space. If non-employment is particularly harmful in one location and particularly sensitive to public policies, then that diehard could still support a place-based revenue-neutral twist that reallocates funds from benefits that subsidize not working to benefits that encourage employment, without encouraging migration or raising housing prices.”
Link to full paper. The two main policy recommendations are an expanded EITC and subsidies for employment.