Latest Research Featured in Economic Development Quarterly
The May issue of Economic Development Quarterly offer two papers that examine the complex relationship between economic development and housing. You can find it here: https://journals.sagepub.com/home/edq
David J. Schwegman, in his paper “Historical Housing Discrimination, Redlining, and the Contemporary Distribution of Local Economic Development Funding: The Case of Chicago,” finds that the locations of current economic development efforts in Chicago are strongly correlated with neighborhoods that suffered housing discrimination before 1940 and underinvestment after 1940. The study uses census tract level data on economic development funding from the Metropolitan Planning Council and historical housing data from the residential security maps developed by the Home Owners’ Loan Corporation and the Federal Housing Administration. Areas that were described as “risky” by the two organizations have benefited from more economic development funding than less risky residential areas. However, Schwegman found economic development funding in these “risky” areas are not correlated with higher median home values.
Akosa and Osei, in their paper “A Threshold Analysis of the Effect of House Prices on U.S. Local Labor Markets,” examined the impact of housing prices on changes in employment. Looking at the tradeable sectors (primarily manufacturing) and changes in housing prices for 321 U.S. metro areas, the researchers found a concave relationship between the two: employment increases with housing prices until it reaches a threshold level when it then declines. This finding suggests that affordable housing is conducive to economic development and that policy makers should link economic development efforts with strategies to improve housing affordability.
Turning away from housing, Landers and Liu, in their paper “Employing Synthetic Control Method to Examine Whether State Corporate Tax Rate Reductions Grow Manufacturing Employment,” estimate the impact of Indiana’s 2012 reduction in its corporate income tax on manufacturing employment. Using a synthetic control method incorporating 23 states that did not alter their corporate taxes during the same time period, the researchers found that Indiana’s corporate tax cut did not have a positive impact on manufacturing employment. However, they did find that the state’s change to a single sales factor apportionment and phasing out a payroll factor between 2007 and 2011 was associated with positive manufacturing employment growth.
The issue’s final research paper examines the relationship between environment regulations and employment. “ The Clean Air Act and Local Employment Base Sensitivity,” by Carr and Yan, examines the relationship between an area’s inability to meet ground-level ozone and sulfur dioxide levels and its employment growth. They found that an area’s nonattainment status was negatively related to county-level employment growth. Moreover, these negative employment effects persisted even after the county achieved attainment status.
The May issue also offers two commentaries. Randazzo and Currid-Halkett, in their commentary “Rethinking the Urban-Rural Divide: Economic Growth in America’s Heartland,” found that the break in the economic performance and conditions between rural and urban areas are not as clear cut as generally believed. Nationwide, rural areas are not, in general, suffering economic/employment decline. One factor that contributes to the negative view of rural areas is the continuous reclassification of rural areas into their neighboring metro areas, taking many of the high performing rural counties out of the sample. Moreover, the authors recommend that policy makers should take a more comprehensive examination of the troubles facing rural areas than simply its economic performance.
Finally, in their commentary “The Consensus (?) on Public Spending on Professional Sports Facilities,” Johnson, Fort, and Rosentraub reexamine the consensus that sport stadiums cannot pass the standard benefit-cost test. The authors argue that the standard fiscal and economic impact evaluation misses two key factors: the valuation of the consumer surplus fans get from the games and the minimum effective payment necessary to keep the home team in town. As the authors conclude: “The goal is the careful assessment of the minimum level of public spending that can be supported by achieving efficient levels of consumers’ surpluses and externalities.”