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Place-based jobs policies seek to create jobs in particular local labor markets. Such policies include business incentives provided by state and local governments, which cost almost 50 billion USD [United States dollars] annually. The most persuasive rationale for these policies is that they can advance equity and efficiency by increasing long-term employment rates in distressed local labor markets. However, current incentives are not targeted at distressed areas. Furthermore, incentives have high costs per job created. Lower costs can be achieved by public services to business, such as manufacturing extension, customized job training, and infrastructure. Reforms to place-based jobs policies should focus on greater targeting of distressed areas and using more cost-effective policies. Such reforms could be achieved by state and local governments acting in their residents' interests or could be encouraged by federal interventions to cap incentives and provide aid to distressed areas.

We estimate the effects on postsecondary education outcomes of the Kalamazoo Promise, a generous, place-based college scholarship. We identify Promise effects using two forms of difference-in-differences: (i) comparing eligible to ineligible graduates before and after the Promise's initiation and (ii) comparing the treated district to comparison districts before and after the Promise's initiation. According to our estimates, the Promise increases college enrollment and credential attainment. Stronger effects occur for women. The results also provide suggestive but less precise evidence that Promise effects extend to disadvantaged groups. [End Page 269] [ABSTRACT FROM AUTHOR]

This paper estimates that long-run changes in a county’s prime-age employment rate are significantly affected by labor demand shocks to both the county and its overlying commuting zone (CZ). The overall benefits of labor demand shocks are due more to CZ demand shocks than county demand shocks. A lower preexisting county employment rate increases the effects of CZ demand shocks. Simulations suggest that low prior employment rate CZs, versus higher-rate CZs, will have much larger employment rate effects from demand shocks. Targeting jobs at more distressed counties within a CZ has modest effects, much lower than the effects of targeting jobs at more distressed CZs.

In this paper, estimates are presented on short-run effects of demand shocks on a local labor market’s employment to population ratio (employment rate). Based on the estimates, commuting zones (CZs) better define a local labor market than counties, because both employment and employment rate effects exhibit large spillovers across counties within a CZ. In addition, the estimates suggest that demand shock effects vary, by an amount that is both statistically and substantively significant, with a CZ’s prior overall employment rate.

This paper provides new estimates of local job multipliers, the ratio of total jobs generated to some initial number of jobs created from a demand shock. Multipliers greatly affect benefits versus costs of local job-creation policies. These new estimates rely on improved methodology and data. The methodology better captures dynamic effects of demand shocks, specifies the model so that demand shocks are more comparable, and is more general in the types of demand shocks that are considered. The data has more industry detail than that used in previous studies. The local job multipliers estimated tend to be about one-quarter lower than typically estimated local multipliers, closer to 1.5 than to 2.0. In addition, demand shocks to all industries matter, not just to tradable industries. Multipliers are similar across different types of geographic areas, with county multipliers being only one-quarter below commuting zone multipliers and state multipliers only one-quarter above commuting zone multipliers. Multipliers are not larger for larger commuting zones, but they increase in commuting zones that have lower initial employment to population ratios. Multipliers are higher for high-tech industries, particularly in commuting zones with a larger initial high-tech share. In such high-tech local economies, high-tech multipliers may be close to 3. While our high-tech multipliers are greater than for other industries, our estimated high-tech multipliers are less than in some prior studies.

As higher education costs rise, many communities have begun to adopt their own financial aid strategy: place-based scholarships for students graduating from the local school district. In this paper, we examine the benefits and costs of the Kalamazoo Promise, one of the more universal and more generous place-based scholarships. Building upon estimates of the program’s heterogeneous effects on degree attainment, scholarship cost data, and projections of future earnings by education, we examine the Promise’s benefit-cost ratios for students differentiated by income, race, and gender. Although the average rate of return of the program is 11%, rates of return vary greatly by group. The Promise has high returns for both low-income and non-low-income groups, for non-Whites, and for women, while benefit assumptions matter more for Whites and men. Our results show that universal scholarships can reach many students and have a high rate of return, particularly for places with a high percentage of African American students. They also highlight the importance of disaggregating benefits and costs by subgroup when performing benefit-cost analysis when the treatment is heterogeneous.

This paper reviews the research literature in the United States on effects of state and local “economic development incentives.” Such incentives are tax breaks or grants, provided by state or local governments to individual firms, that are intended to affect firms’ decisions about business location, expansion, or job retention. Incentives’ benefits versus costs depend greatly on what percentage of incented firms would not have made a particular location/expansion/retention decision “but for” the incentive. Based on a review of 34 estimates of “but for” percentages, from 30 different studies, this paper concludes that typical incentives probably tip somewhere between 2 percent and 25 percent of incented firms toward making a decision favoring the location providing the incentive. In other words, for at least 75 percent of incented firms, the firm would have made a similar decision location/expansion/retention decision without the incentive. Many of the current incentive studies are positively biased toward overestimating the “but for” percentage. Better estimates of “but for” percentages depend on developing data that quantitatively measure diverse changes in incentive policies across comparable areas.

Drawing on the Panel Study of Income Dynamics, we document a startling empirical pattern: the career earnings premium from a four-year college degree (relative to a high school diploma) for persons from low-income backgrounds is considerably less than it is for those from higher-income backgrounds. For individuals whose family income in high school was above 1.85 times the poverty level, we estimate that career earnings for bachelor’s graduates are 136 percent higher than earnings for those whose education stopped at high school. However, for individuals whose family income during high school was below 1.85 times the poverty level, the career earnings of bachelor’s graduates are only 71 percent higher than those of high school graduates. This lower premium amounts to $300,000 less in career earnings in present discounted value. We establish the prevalence and robustness of these differential returns to education across race and gender, finding that they are driven by whites and men and by differential access to the right tail of the earnings distribution.

Drawing on the Panel Study of Income Dynamics, we document a startling empirical pattern: the career earnings premium from a four-year college degree (relative to a high school diploma) for persons from low-income backgrounds is considerably less than it is for those from higher-income backgrounds. For individuals whose family income in high school was above 1.85 times the poverty level, we estimate that career earnings for bachelor’s graduates are 136 percent higher than earnings for those whose education stopped at high school. However, for individuals whose family income during high school was below 1.85 times the poverty level, the career earnings of bachelor’s graduates are only 71 percent higher than those of high school graduates. This lower premium amounts to $300,000 less in career earnings in present discounted value. We establish the prevalence and robustness of these differential returns to education across race and gender, finding that they are driven by whites and men and by differential access to the right tail of the earnings distribution.

We estimate the effects on postsecondary education outcomes of the Kalamazoo Promise, a generous place-based college scholarship. We identify Promise effects using difference-in-differences, comparing eligible to ineligible graduates before and after the Promise’s initiation. According to our estimates, the Promise significantly increases college enrollment, college credits attempted, and credential attainment. Stronger effects occur for minorities and women. Predicted lifetime earnings effects of the Promise’s credential gains, compared to the Promise’s scholarship costs, represent an internal rate of return of 11.3 percent. Based on our results, simple and generous scholarships can significantly increase educational attainment and provide net economic benefits.

Job loss is typically not valued in benefit–cost analyses of environmental regulations. But empirical evidence suggests that involuntary job loss results in large social costs, particularly when local unemployment is high. This article presents estimates of the social costs of job loss in the United States, based on estimates of how local labor markets respond to job changes. These estimated social costs have a present value per job lost in the hundreds of thousands of dollars. However, these social costs are far less than the earnings associated with the lost jobs, because of labor market adjustments as well as some offsets from the value of increased non-work time. An examination of major U.S. environmental regulations suggests that job losses will usually add only modestly to overall regulatory costs. However, if the magnitude of a regulation’s benefits and costs are close in monetary terms, then accounting for job loss could tip the regulatory decision. It is also important for regulatory analyses to examine the potential magnitude of gross job loss, particularly in high unemployment areas.

This article estimates how effects of local labor demand shocks on labor market outcomes vary with the initial local unemployment rate, which has not been previously studied. The data are on 23 large U.S. metro areas from 1979 to 2011. The article finds that demand shocks to local job growth have greater effects in increasing real wages if the local economy initially has low unemployment. However, demand shocks have greater effects in reducing unemployment, and increasing labor force participation, if the local economy initially has high unemployment, although these differences are only of modest statistical significance. The estimates are based on a new econometric approach to determining the correct dynamic structure for how local labor markets respond to demand shocks. This new approach finds that demand shocks have persistent effects on labor force participation and real wages, but not on unemployment, which contradicts some previous research.

In this paper, benefits and costs are estimated for a universal pre-K program, provided by Tulsa Public Schools. Benefits are derived from estimated effects of Tulsa pre-K on retention by grade 9. Retention effects are projected to dollar benefits from future earnings increases and crime reductions. Based on these estimates, Tulsa pre-K has benefits that exceed costs by about 2-to-1. This benefit cost ratio is far less than the much higher benefit-cost ratios (ranging from 8-to-1 to 16-to-1) for more targeted and intensive pre-K programs, such as Perry Preschool and the Chicago Child-Parent Center (CPC) program. Comparing benefit-cost results from different studies suggests that our more modest estimates are due to two factors: 1) smaller percentage effects of pre-K on future earnings and crime in Tulsa than in Perry and CPC, and 2) smaller baseline crime rates in Tulsa than in the Perry and CPC comparison groups.

When state and local governments engage in balanced budget changes in taxes and spending, what fiscal multiplier effects do such policies have on creating local jobs? Traditionally, the view has been that possible job-creation effects of such state and local "demand-side” policies are smaller, second-order effects. Such effects might be worthwhile to take into consideration when a state or local government balances its budget during a recession, but the effects were believed to be of modest magnitude, and not of major importance for more general state and local public policies. However, recent estimates of fiscal multiplier effects of state and local spending and tax policies suggest much larger demand-side effects of such policies on local jobs. These fiscal multiplier effects are large enough to suggest relatively low costs per job created of some tax and spending policy combinations, sufficient to alter the net benefits of many public policies. In particular, this recent research suggests that policies that use tax increases on the top 10 percent of the income distribution to finance either public spending expansions or tax relief for the bottom 90 percent of the income distribution may offer some job creation benefits that are large enough to alter state and local policy decisions. Furthermore, the cost per job created of state business tax incentive policies or business tax cuts may be significantly altered after taking into account the opportunity costs of financing such policies by cutting public spending or raising taxes on the bottom 90 percent.

This article simulates job and fiscal impacts of the Michigan Economic Growth Authority’s tax credit program for job creation, commonly called “MEGA.” Under plausible assumptions about how such credits affect business location decisions, the net costs per job created of the MEGA program are simulated to be of modest size. The job creation impacts of MEGA are simulated to be considerably larger than devoting similar dollar resources to general business tax cuts. The simulation methodology developed here is applicable to incentives in other states.

We estimate the impact of manufacturer business taxes on value added during the 1990s for 15 manufacturing sectors in 20 U.S. states. When the tax climate is properly measured as the potential liability arising from new investment in a state, we estimate that a 10 percent reduction in the effective tax liability is associated with a 3.5 to 5.3 percent increase in value added for the state's targeted manufacturing industry. When we isolate the value of industrial incentives from the basic tax system in our theoretically preferred marginal tax measure, we find that a 10 percent reduc- tion in liability achieved by way of lowering taxes is associated with a 4.5 percent increase in value added while an equivalent reduction achieved by way of increasing incentives is associated with only 1.2 percent industrial growth, the latter elasticity not statistically different from zero. Most evidence from econometric studies concludes that business taxes negatively impact regional economic growth in the United States insofar that these costs can be disentangled from the benefits of productivity-enhancing public expenditures financed with the taxes. Despite relatively robust evidence of negative long-run tax-price elasticity, however, considerable variation remains in magnitude of estimates. Theory suggests a factor's price elasticity should be roughly proportionate to the location determinant's share in firm total costs. When wages and other factor prices differ over alternative sites, comparably smaller costs to the firm in the form of taxes are likely to matter much less. A number of plausible explanations remain for divergent estimates of tax-price elasticity of manufacturing growth.

This paper estimates future adult earnings effects associated with a universal pre-K program in Tulsa, Oklahoma. These informed projections help to compensate for the lack of long-term data on universal pre-K programs, while using metrics that relate test scores to valued social benefits. Combining test-score data from the fall of 2006 and recent findings by Chetty et al. (forthcoming) on the relationship between kindergarten test scores and adult earnings, we generate plausible projections of adult earnings effects and a partial cost-benefit analysis of the Tulsa pre-K program. We find substantial projected earnings benefits for program participants who differ by income and by program dosage. The dollar effects and benefit-cost ratios are similar across groups, with benefit-to-cost ratios of approximately 3 or 4 to 1. Because we only consider adult earnings benefits, actual benefit-cost ratios are likely higher, especially for disadvantaged children.

In this paper, benefits and costs are estimated for a universal pre-K program, provided by Tulsa Public Schools. Benefits are derived from estimated effects of Tulsa pre-K on retention by grade 9. Retention effects are projected to dollar benefits from future earnings increases and crime reductions. Based on these estimates, Tulsa pre-K has benefits that exceed costs by about 2-to-1. This benefit cost ratio is far less than the much higher benefit-cost ratios (ranging from 8-to-1 to 16-to-1) for more targeted and intensive pre-K programs, such as Perry Preschool and the Chicago Child-Parent Center (CPC) program. Comparing benefit-cost results from different studies suggests that our more modest estimates are due to two factors: 1) smaller percentage effects of pre-K on future earnings and crime in Tulsa than in Perry and CPC, and 2) smaller baseline crime rates in Tulsa than in the Perry and CPC comparison groups.

Research will be more relevant to state and local economic development policy if this research focuses on research gaps. One gap is better estimates of how local labor demand policies affect local jobs. A second gap is better understanding of how labor supply policies affect overall local labor market outcomes, adjusting for spillovers and displacement. A third gap is better understanding of how effects of local employment shocks vary with local labor market conditions.

This review essay debates the policy issues raised by the book Retooling for Growth: Building a 21 st Century Economy in America’s Older Industrial Areas, edited by Richard M.

Place-based college scholarships, such as the Kalamazoo Promise, provide students who live in a particular place, and/or who attend a particular school district, with generous college scholarships. An important potential benefit from such “Promise programs” is their short-term effects on local economic development. Generous Promise scholarships provide an incentive for families to locate in a particular place, which may change migration patterns, and potentially boost local employment and housing prices. Using data from the American Community Survey, this paper estimates the average effects of eight relatively generous Promise programs on migration rates and housing prices in their local labor market. The paper finds evidence that Promise programs lead to significantly reduced out-migration rates for at least three years after a Promise program is announced. These reductions in out-migration rates are larger for households with children, and are also larger when we focus on smaller areas around the Promise-eligible zone rather than the entire local labor market. These out-migration effects are large, implying that Promise programs lead to a 1.7% increase in overall population of the local labor market.