Building Assets for the Rural Future

Apply Asset-Building Principles to Traditional Economic Development

Apply Asset-Building Principles to Traditional Economic Development

North Carolina employs a diverse arsenal of economic development programs to attract and retain businesses. The state has been very successful in these efforts, being ranked first in the nation for business climate for eight of the last nine years by Site Selection magazine.

However, the benefits of traditional industry recruitment and retention do not always reach rural communities and households on the economic margin.  In the first place, industrial recruitment or retention may be difficult to accomplish in areas with weak infrastructure, low-skilled workers, and limited access to markets. Even if such efforts are successful, it is not certain that new industry will accomplish the community’s asset- and wealth-building goals. On one hand, there may be questions surrounding the ability of unemployed workers to qualify for new jobs; whether the jobs will pay family-sustaining wages; and what environmental hazards may be generated by the industry. On the other hand, research suggests that traditional state and local economic development policies may enhance job opportunities and earnings growth among minorities and workers with less education.[1]

Efforts to target traditional economic development programs to economically distressed parts of North Carolina have met with mixed success.[2] Recent proposals have discussed ways in which this targeting can be improved.[3] However, even if a policy successfully steers investment to economically-distressed areas, there typically are no guarantees that households on the economic margin will benefit.[4]

With these concerns in mind, some urban and rural leaders have altered their approach to traditional economic development activities with the aim of maximizing the benefit for communities and households on the economic margin. Tactics exhibiting some promise for rural North Carolina are discussed below. The first attempts to leverage incentives and capital investment as a means of enhancing asset-building among those on the economic margin (Maximize Asset-Building Potential of Capital Investment and Economic Development Incentives). The second tactic uses cluster-based development as a means for building community and household assets ( Identify Rural Industry Clusters). The third focuses on rural entrepreneurship (Support Rural & Low-Wealth Entrepreneurs).  

[1] Timothy J. Bartik, Who Benefits from State and Local Economic Development Policies? 155, 206 (1991)  (“The positive effects of increased metropolitan employment on occupational advancement are strongest for blacks, less educated, and younger workers…The empirical estimates indicate that faster local growth has stronger effects on the annual real earnings of blacks…and on less-educated individuals.”).

[2] J. Select Comm. on Economic Development Incentives, Report to the 2009 session of the 2009 General Assembly 9-11 (N.C. 2009) (“Targeting incentives to distressed areas makes policy sense, but there is scant evidence that they make a difference in location decisions.”).

[3] Ibid. at 11-12 (“Discretionary incentive programs provide a better opportunity for strategic economic development targeting [to economically disadvantaged areas] than statutory tax credits.”).

[4]Jonathan Q. Morgan, Using Economic Development Incentives: For Better or for Worse, 74 Popular Government 16, 26 (2009)  (noting that although evidence exists that North Carolina’s Lee Act is effective at encouraging businesses to hire more workers in economically-disadvantaged areas, traditional incentives in other states seem to stimulate growth only in wealthy areas).  See also Timothy J. Bartik, Solving the Problems of Economic Development Incentives, 36 Growth and Change 139, 146 (2005) (“It is often assumed that benefits can be measured by looking at the earnings and tax base associated with the new business activity.  This assumption forgets that only a portion of the new jobs go to local residents and the unemployed.”); Alan Peters & Peter Fisher, The Failures of Economic Development Incentives, 70 J. Am. Planning Ass’n 27, 34 (“The vast majority of workers in enterprise zones did not live in the enterprise zone; moreover the vast majority of those who lived in these zones did not work in them.  The local employment gains derived from bringing jobs to poor neighborhoods are greatly diluted.”).

Topics - Local and State Government
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