What Is Place-Based Economic Development?

What Is Place-Based Economic Development?

May 24, 2023
What Is Place-Based Economic Development?
The Economic Development Administration (EDA) defines
Some proponents of PBED have argued that residents of
economic development as creating “the conditions for
areas that have experienced job losses often experience
economic growth and improved quality of life by expanding
other challenges such as constraints on mobility, which may
the capacity of individuals, firms, and communities to
complicate the ability of such residents to relocate to areas
maximize the use of their talents and skills.”
with more job opportunities. As a result, some argue,
enabling job creation in distressed places may be a viable
One strategy for attempting to achieve those goals is place-
strategy for promoting economic opportunity.
based economic development (PBED). PBED seeks to
develop policies and programs that address conditions in a
Some also suggest that strategies that encourage people to
specific location, often in places that are economically
relocate to areas with greater employment opportunities
distressed. This approach differs from people-based
have potential downsides. For example, a 2020 study from
policies, which may provide benefits to certain groups of
economist Timothy Bartik found that the subsidy needed to
individuals regardless of where they live or work.
persuade someone to move out of their home area can
exceed 100% of that person’s annual income. Out-
In addition to longstanding federal efforts to address the
migration may also reduce local demand for goods and
economic conditions of particular places (such as the
services, possibly leading to a further decrease in job
Community Development Block Grant program), Congress
opportunities.
has recently expanded support for PBED policies. Laws
enacted in the past few Congresses, including select
Job creation in distressed areas may also have a larger
provisions in both the CHIPS and Science Act (P.L. 117-
effect on a regional economy than job creation in more
167) and the Infrastructure Investment and Jobs Act (P.L.
economically secure places. For example, a 2021 study
117-58), have authorized large new PBED programs.
from the W.E. Upjohn Institute for Employment Research
found that in areas with high economic performance, about
Defining Place-Based Economic
14% of jobs created help increase the employment rate of
Development
local residents, partly because some people taking the jobs
There is no standard definition of PBED in statute or in
did not live in the immediate vicinity or already had jobs.
practice. However, economic development practitioners
However, in distressed areas, 50% of jobs created increase
often use the term to refer to efforts to boost the economic
the employment rate of local residents.
performance within a particular unit of geography, often
focusing on areas that are economically distressed. The unit
There are also equity arguments for PBED targeting
of geography varies, ranging from the census tract level to a
distressed areas. Research has found that the benefits of job
city or multi-county region. Multiple federal, state, and
creation in affluent areas tends to accrue to wealthier
local departments and agencies administer PBED programs.
residents. However, a higher percentage of the benefits
from job creation in distressed areas tends to go to low-
PBED includes several types of programs, including
income residents (who are more likely to be non- or under-
workforce development programs that target individuals
employed.)
living or working in a defined area, tax incentives or other
benefits for businesses or other entities that locate or invest
Counterarguments
in a certain place, and infrastructure development. While
Certain critics of PBED argue that if the goal of economic
state and local governments implement some of these
development is to help people, then PBED is not an
programs, this product focuses on federal PBED programs.
effective method for achieving that outcome. Practitioners
and policymakers have periodically expressed concern that
Arguments for Place-Based Economic
benefits from PBED programs do not reach the intended
Development
recipients. They argue that focusing on places may run the
PBED programs generally aim to improve local conditions
risk of resources going to unintended activities or people.
by providing an incentive to increase employment and
investment in a geographic area. Researchers have found
Researchers have also questioned whether policies designed
that differences in geography are associated with disparities
to create economic benefits in specific areas over others
in wages and employment opportunities. Some Members of
actually create aggregate benefits. Some studies have found
Congress have expressed concern about these reports, while
that certain PBED programs have had little or no economic
some observers have noted that PBED policies may provide
effect.
a way to address such geographic imbalances.
Additionally, there are questions about whether wealthier
residents are likelier to capture potential gains from land
https://crsreports.congress.gov

link to page 2 What Is Place-Based Economic Development?
value increases resulting from PBED, and whether that
The New Markets Tax Credit (NMTC) is a tax credit meant
outcome is consistent with programmatic goals.
to encourage private investment in low-income census
tracts. Congress authorized the NMTC in the Community
Federal Programs
Renewal Tax Relief Act of 2000 (P.L. 106-554).
Congress has a longstanding interest in PBED. The federal
government has administered PBED programs for decades,
Similar federal approaches, such as Empowerment Zones
and Congress continues to authorize new PBED programs,
(EZs), Enterprise Communities (ECs), and Renewal
as described below.
Communities (RCs) are federally designated geographic
areas characterized by high levels of poverty and economic
In the 117th Congress, the CHIPS and Science Act (P.L.
distress. Businesses and local governments could be eligible
117-167) authorized new PBED programs, including:
for federal grants and tax incentives for activities and
investments aimed at revitalizing selected areas. Since
• The Recompete Pilot program. Administered by EDA,
1993, Congress has authorized three rounds of EZs (1993,
the program will provide grants and cooperative
1997, and 1999), two rounds of ECs (1993, 1997), and one
agreements to persistently distressed areas in support of
round of RCs (2000).
long-term economic development and job creation.
•
The Community Development Block Grant (CDBG)
The Regional Technology and Innovation Hubs
program can also fund PBED initiatives. Authorized by
program. Administered by EDA and the National
Congress in the Housing and Community Development Act
Institute of Standards and Technology (NIST), the
of 1974 (P.L. 93-383) and administered by the Department
program will designate at least 20 geographically
of Housing and Urban Development (HUD), CDBG offers
distributed technology and innovation hubs in areas that
flexible funding to state and local governments to use for a
are not leading technology centers to support technology
variety of purposes. However, eligible activities must
development and job creation.
principally benefit low- or moderate-income persons; aid in
• The Regional Innovation Engines program.
preventing or eliminating slums or blight; or address an
Administered by the National Science Foundation
imminent threat to the health and safety of residents. Many
(NSF), the program will support activities to build
of the eligible activities have a place-based focus, including
regional innovation systems, including commercializing
assistance to neighborhood-based organizations and
research and training graduate students.
acquisition of real property.
Table 1 summarizes these programs.
Considerations for Congress
Table 1. Selected New PBED Programs Authorized in
In light of the newly established programs and expanded
117th Congress
funding authorized during the 117th Congress for PBED
efforts, Congress may have an interest in monitoring the
Authorization
programs’ effectiveness. Studies from the Government
Authorizing
of
Accountability Office and HUD concluded that some
Program
Agency
Law
Appropriations
previous federal PBED efforts—specifically, the EZ, EC,
and RC programs—were not shown to have caused a
Recompete EDA
Division B,
$1 bil ion through
general improvement in local economic conditions,
Pilot
Title VI,
FY2026
although the studies noted the difficulty of measuring the
Subtitle C,
effects of the programs on overall economic conditions.
Sec. 10621 of
P.L. 117-167
Congress may question whether PBED programs represent
Regional
EDA and Division B,
$10 bil ion
a government attempt to “pick” certain places over others.
Technology NIST
Title VI,
through FY2027
One persistent criticism of PBED programs is that, since
and
Subtitle C,
they may encourage businesses or investment to move from
Innovation
Sec. 10621 of
one place to another, they may not create new net economic
Hubs
P.L. 117-167
benefits, and one location’s success could come at the
expense of somewhere else. Some PBED programs, such as
Regional
NSF
Division B,
$6.5 bil ion
CDBG, have regulations in place to prevent or mitigate this
Innovation
Title III,
combined for RIE
displacement. Congress may want to monitor PBED
Engines
Subtitle G,
and NSF’s
programs’ ability to protect against such outcomes.
(RIE)
Sec. 10388 of
Translation
P.L. 117-167
Accelerator
There may be potential federalism issues related to PBED
program through
as well. Much of economic development planning and
FY2027
policy development occurs at the state or local levels. This
Source: CRS analysis of authorizing legislation.
includes many state “zone” programs offering tax
incentives or other benefits for investments in or relocation
The 115th Congress authorized Opportunity Zone (OZ) tax
to designated areas. As some federal PBED programs use
incentives in P.L. 115-97. The incentives are available to
similar tactics, Congress may want to ensure that federal
private investors if they invest in economically distressed
PBED efforts complement and not duplicate or compete
census tracts designated as OZs. Qualified OZ designations
with state efforts.
are in effect through the end of 2026.
https://crsreports.congress.gov

What Is Place-Based Economic Development?

IF12409
Adam G. Levin, Analyst in Economic Development Policy

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.

https://crsreports.congress.gov | IF12409 · VERSION 1 · NEW