place based policies 1 Flashcards
(26 cards)
What are place-based anti-poverty policies?
Policies that target improving poor neighborhoods themselves—by changing the businesses, people, or public services in those areas—rather than relocating residents.
How do place-based and people-based anti-poverty policies differ?
Place-based: Invest in a specific location; eligibility is determined by living or working there (e.g. Opportunity Zones).
People-based: Target individuals regardless of location (e.g. EITC, food stamps).
What is the core goal and structure of place-based policies?
Goal: Improve neighborhood conditions so that they no longer limit residents’ life chances.
Structure: Make targeted investments in defined zones; only residents or businesses in those zones qualify.
Name five prominent examples of place-based revitalization programs.
Opportunity Zones, Empowerment Zones, HOPE VI / Choice Neighborhoods, Trade Adjustment Assistance (TAA), Promise Neighborhoods.
What approaches do place-based programs commonly use to uplift poor areas?
They try to change one or more of:
- Income mix of residents (mixed-income housing)
- Housing quality (rehab or rebuild)
- Public school quality
- Profitability of hiring local workers
- Profitability of real estate investment
- Skills of local workforce.
What was the HOPE VI initiative, and what did it achieve?
Action: Demolished distressed public housing and rebuilt mixed-income communities (market-rate, LIHTC, and public units).
Outcome: Improved physical conditions and resident income mix—but little rigorous evidence on residents’ life improvements.
How did Choice Neighborhoods build on HOPE VI?
Added a stronger focus on resident services (education, job training, social supports) alongside physical and income-mix redevelopment.
What were Empowerment Zones (EZ) in the mid-1990s?
Specially designated low-income neighborhoods where:
- Local employers got a tax credit up to 20% of the first $15,000 in wages paid to zone residents.
- Block grants funded business assistance, infrastructure, youth services, homeownership, emergency housing, etc.
How did Busso, Gregory & Kline (2013) evaluate Empowerment Zones?
A difference-in-differences design comparing outcomes in neighborhoods that became EZs versus applicant neighborhoods that were rejected.
What effects did EZ designation have on jobs and resident wages?
Jobs in zone: +18% (log 0.179)
Weekly wages of zone residents working in zone: +13% (log 0.133).
How did Empowerment Zones impact housing rents and home values?
Rents: No significant change (log 0.006).
House values: +28% (log 0.281).
What overarching insight emerges from these place-based experiments?
Strategic investments in neighborhood conditions can spur local job growth and property-value gains, but measuring resident well-being remains crucial—and different programs may yield different social returns.
What are the five economic justifications for place-based anti-poverty programs?
- Capture agglomeration externalities: harness benefits of co-locating firms and workers.
- Address negative externalities from concentrated poverty/unemployment: protect residents’ productivity, health, and well-being.
- Insure against local shocks: buffer communities from dramatic booms/busts (e.g. deindustrialization).
- Differential policy response across space: tailor interventions to high- vs. low-unemployment areas for better efficiency.
- Target places rather than people: if location is a stronger need indicator than individual circumstances, place-based targeting may be more effective.
Why might subsidizing job relocation zero-sum?
If there are no positive spatial spillovers, moving jobs from one locality to another simply reallocates existing employment (“musical chairs”) without net job creation.
Under what conditions can place-based programs generate net new jobs?
When there are positive spatial externalities—such as agglomeration benefits or reductions in concentrated-poverty penalties—so that subsidies spur genuinely additional hiring and economic activity.
How do agglomeration and concentrated-poverty externalities differ in motivating place-based policy?
Agglomeration (positive): co-location yields productivity gains for firms and workers.
Concentrated-poverty (negative): high local poverty/unemployment harms residents’ outcomes, so alleviating it yields gains.
What trade-off should policymakers consider when deciding between place-based and people-based approaches?
Whether to improve neighborhood conditions (place-based) or directly support individuals regardless of location (people-based), based on which yields greater social returns given local spillovers and administrative feasibility.
What is spatial equilibrium?
A state in which individuals are indifferent between locations because each yields the same net “happiness” (utility) once wages, rents, and local amenities are all accounted for.
Write the linear utility function used to model location choice.
What must hold true for two locations, A and B, in equilibrium?
What is a compensating differential?
An adjustment in non-wage factors (amenities) that offsets differences in net pay, ensuring equal utility across locations.
How can we infer relative amenity levels between two cities?
Compute each city’s net pay. Compare net pays: if City A’s net pay exceeds City B’s, then City B must have higher amenities by exactly the difference to equalize utility.
If wA−rA=$2,000 and wB−rB=$500, what must be true about amenities?
City B’s amenities must exceed City A’s by $1,500: AB−AA=(wA−rA)−(wB−rB)=$1,500.
