Panel Paper: A Longitudinal Analysis of Economic Development Incentive Usage: Explaining Why Local Governments Change Strategies

Thursday, November 7, 2019
I.M Pei Tower: 2nd Floor, Tower Court C (Sheraton Denver Downtown)

*Names in bold indicate Presenter

Eric Stokan, Wayne State University, Aaron Deslatte, Indiana University and Megan Hatch, Cleveland State University

The pursuit of economic development at the municipal level necessitates that local governments make tradeoffs when determining how best to spur economic activity. A large literature is focused on understanding the factors which lead local governments to pursue economic development policies (Rubin & Rubin, 1987; Fleischmann, Green, and Kwong, 1992; Zheng & Warner, 2010) and even to explain what accounts for tradeoffs in policy usage (Deslatte and Stokan 2017). Despite this, research has failed to consider the role of historical factors and policy usage in these determinations.

Within economic development scholarship, various researchers posit that economic development reflects a series of waves, exhibit path dependency through “lock in” of policy utilization, and envision a process of policy layering as a result of an unwillingness to abandon these policies; however, the causal mechanisms that bring about these processes have been unclear.

This article draws upon 30 years of economic development decisions across the United States to understand what leads local governments to prioritize efficiency- or equity-oriented policies. It finds that resource dependence theory (RDT) helps to explain the decision to pursue efficiency and equity. We find that equity-enhancing economic development policies are more likely when local governments face less competitive pressures, have greater resource capacities, and have greater governmental involvement in the economic development planning process. Leveraging these factors can aid governments as they struggle to navigate a more sustainable path toward economic growth and equity.