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Economic Development Planning
Many thousands of municipalities, probably the majority of counties, and all 50 states make serious efforts to promote their own economic development. The exact amount of money spent on local economic development is not known. But when the operating expenses of economic development agencies, direct expenditures on economic development, and a wide variety of indirect expenditures in the form of tax abatements are added together, the figure is many billions of dollars annually. The present U.S. scene is characterized by a high level of intermunicipal and interstate economic competition.
Such competition is driven partly by labor market considerations. Citizens expect local and state governments to foster job growth so as to tighten labor markets, thus pushing up wage rates and pushing down unemployment rates. Politicians run for office on the basis of their economic development records. When Texas governor Rick Perry ran for the Republican presidential nomination in 2012 his biggest single argument for why he should be president was the state's record of employment growth during his administration.
Local and state governments are also driven to economic competition for tax reasons. Caught in the squeeze between the cost of providing services and citizens' resistance to being taxed, broadening the tax base by bringing in new commercial and industrial activity looks like an attractive course of action. Interplace economic competition has a certain amount of
"positive feedback" built into it. If one state or municipality offers firms an attractive subsidy for locating there, or launches a massive publicity campaign to promote itself as a good location, other states and municipalities are likely to respond in kind. Thus offer begets counteroffer, and interplace economic competition becomes more intense over time. This interplace competition has promoted economic development planning as a major subspecialty of the planning profession. Planning schools offer courses in economic development planning, and the American Planning Association has an economic development planning division. Before we turn to the subject of economic development planning, some historic and national background will be useful.
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