Pat Kline and Enrico Moretti: People, Places and Public Policy: Noted
Pat Kline and Enrico Moretti: People, Places and Public Policy: Some Simple Welfare Economics of Local Economic Development Programs:
Subsidizing poor or unproductive places is an imperfect way of transferring resources to poor people.... Mobility responses may lead the local cost of living to change, which in turn can lead landlords, some of whom may not live in the community, to capture some of the benefits associated with a policy. This is more likely when the housing market is already tight or when there are sharp restrictions on building. For this reason, it may be advisable to target areas with depressed housing markets and high vacancy rates that have enough slack to absorb a demand increase without a large increase in the cost of living.... A potentially compelling case for place based policies can be made based upon the remediation of localized market imperfections. When private and social returns diverge, local governments may be able to raise the welfare of their residents by re-aligning private incentives through taxes or subsidies or the provision of local public goods.... The presence of agglomeration economies does not imply that every state or country should attempt to generate a Silicon Valley equivalent from scratch...