The August issue of the Economic Development Quarterly offers a thoughtful discussion about the complexities and effectiveness of regional economic development policies using case studies of two rivaling metro areas: Cleveland and Pittsburgh. Tim Bartik sets the stage of the decision by questioning if economic development policy can direct economic transformation or if it is a matter of luck.
Ben Armstrong in his “Industrial Policy and Local Transformation: Evidence from the U.S. Rust Belt” examines how differing state economic development policies in the 1980’s impacted the regional strategies implemented in Cleveland and Pittsburgh. In Pittsburgh, the region’s research universities took the lead, while in Cleveland, state policies focused on improving conditions for the area’s core sectors. Armstrong concludes that empowering local institutions, such as its universities, may encourage structural change.
Sabina Deitrick and Christopher Briem, in their “The Pittsburgh Transition: Not Quite So Simple,” respond that while Armstrong is correct in his observing that the state empowered Pittsburgh’s universities to play an active role, other factors also contributed to the area’s economic change. They also warn that the two regions’ economies may still not be that different.
Ned Hill, in his “Development Starts with Historical Endowments: Industrial Policy and Leadership are Catalysts,” argues that Cleveland and Pittsburgh did not start at the same position, did not have the same assets, nor had the same leadership structure. Therefore, it is questionable if one can cite state policies as being the catalyst for change.
The exchange is completed with Armstrong ’s response “Would Pittsburgh have Transformed without State Intervention? A Response to Comments.” He willing to accept Hill’s point that Pittsburgh had stronger universities from the start, but that state policy encourages them to work together.
In addition to being involved in the above discussion, Ned Hill, with his co-author Merissa C. Piazza, examines high-growth firms (gazelles) in Ohio, in their article “Not all High-Growth Firms are Alike: Capturing and Tagging Ohio’s Gazelles.” They found that only 1.2% of Ohio’s firms are gazelles, and that a large share of these firms are in the information, financial, professional, and business services sectors. Nongazelle firms are more likely to be in manufacturing and the leisure and hospitality industries.
Finally, it has been almost 25 years since a comprehensive literature review of taxes and economic development policy was published. Andrew Hanson corrects this in his “Taxes and Economic Development: An Update on the State of the Economics Literature.” He offers a current review of the empirical literature on tax-based economic development incentives. Hanson’s major conclusions include that, in general, property tax abatements tend to be capitalized into property values. At the same time, unduly limiting property taxes so that valuable public services are hindered lowers property values. Tax increment financing is shown by most studies to not be an effective economic development tool. Finally, empirical based studies continue to be split on the effectiveness of zone-based tax policy.
The August issue of the Economic Development Quarterly is at https://journals.sagepub.com/home/edq