Association for Public Policy Analysis & Management

The intense pursuit of economic growth in our decentralized federal system leads to competitive decision making where concerns of economic efficiency and growth are advanced before equity. Paul Peterson (1995) argued that state and local governments should pursue developmental policy because these were the levels of government best suited to handle development. Inherent in this understanding was an implicit preference for economic efficiency. Yet Kantor (2016) suggests that local governments pursuing economic growth in this decentralized system leads to disinvestment among those communities losing firms. Wang, Ellis, and Rogers (2018) demonstrate that the pursuit of economic development incentives at the state-level exacerbates inequality.

This article makes two important contributions. First, it constructs a unique longitudinal database of economic development incentive decisions, local barriers to economic development, measures of regional fragmentation, demographic characteristics of the local and metropolitan environment, and socio-economic, institutional, and political contexts that shape economic development and equity decisions over 30 years (1984-2014). Second, it utilizes this newly constructed data source to empirically estimate the factors that lead governments to make tradeoffs between the pursuit of economic growth and equity goals.

This article builds upon recent research finding that local governments pursue policies that enhance both economic development and sustainability pursuits (Osgood, Opp, and Demasters, 2016), yet these governments make tradeoffs between these commitments when using traditional financial economic development incentives (Deslatte and Stokan, 2017). Rather than looking at the decision context as a snapshot in time, we model the dynamics of these decisions over the longitudinal context with a panel of municipalities responding to at least 5 waves of the survey. This research has implications for researchers who seek to better understand these tradeoffs and practitioners making these decisions.