Place based policies 2 ** Flashcards
(16 cards)
What is the mantra ‘Help Poor People, Not Poor Places,’ and who popularized it?
It argues that targeting assistance to individuals (regardless of location) is more efficient than subsidizing entire places—place-based aid can just shift activity from more productive to less productive areas. Popularized by Edward Glaeser (2008).
What are the two historical concerns economists have with place-based policies?
- Inefficient resource allocation: Subsidies may prop up low-productivity areas at the expense of more efficient ones. 2. Benefit erosion: Gains are eroded as housing costs/rents rise or new people move in, capturing the benefits.
How does the spatial equilibrium framework predict place-based policy benefits will be eroded?
By raising local wages (w) or amenities (A), policy increases total utility. Equilibrium then drives up rents (r) and/or attracts migrants until net utility equalizes again—dampening initial gains.
Who benefits and who loses when place-based policies drive up housing costs?
Winners: Existing homeowners and landlords (they capture capital gains). Losers: Renters, especially low-income ones, as they face higher rents without owning equity.
What might limit landlords’ ability to raise rents in targeted areas?
An elastic housing supply—if it’s easy to build more housing, new units absorb demand and keep rents from skyrocketing.
How can migration responses ‘undo’ place-based policy effects?
A wage or amenity subsidy attracts in-migrants. Increased labor supply pushes wages back down; higher population can also pressure housing markets, eroding per-capita gains.
Spatial equilibrium assumes perfect mobility. Is this realistic?
No—empirical evidence (e.g., Bartik 2020; Autor, Dorn & Hanson 2018) shows many people don’t move even from declining places, and programs like MTO struggle to induce moves.
How does mobility differ over short vs. long horizons?
Short-run: Labor supply is relatively inelastic; people seldom move quickly. Long-run: Mobility rises; over years or decades, workers relocate to take advantage of growing job markets.
Name Bartik’s five lessons for designing effective place-based policies.
- Geographically target to truly distressed areas. 2. Focus on high-multiplier industries (e.g., high-tech) to stimulate local spillovers. 3. Avoid favoring large firms disproportionately with incentives. 4. Enhance business inputs (customized services, infrastructure, land development). 5. Tailor policies to local conditions—one size does not fit all.
What is a ‘high-multiplier industry,’ and why target it?
Industries whose local spending generates large ripple effects (jobs, income). Targeting them maximizes spillover benefits for the broader community.
Why must place-based policies be tailored to local conditions?
Because local economies differ in resources, constraints, and opportunities—what works in one place may fail in another.
What are ‘business inputs’ in Bartik’s framework?
Infrastructure, customized technical assistance, land‐use planning—supports that help local firms grow and attract investment.
How does more precise geographic targeting improve efficiency?
By directing resources to the most distressed pockets, reducing wasted subsidies in areas with weaker needs or higher autonomic growth.
How does in-migration alter policy outcomes?
New arrivals increase competition for jobs and housing; may dilute benefits for original residents, unless supply adjusts or migration is restricted.
Summarize the main critiques of place-based approaches and potential mitigations.
Critiques: Inefficiency, benefit capture by landlords or migrants, rising costs, limited mobility. Mitigations: Geographic targeting, supply-elastic housing, long‐run horizons, tailored mixed interventions (wages + amenities + business inputs).
