Does "Trickle Down" Work? Economic Development Strategies and Job Chains in Local Labor Markets

Does "Trickle Down" Work? Economic Development Strategies and Job Chains in Local Labor Markets

Does "Trickle Down" Work? Economic Development Strategies and Job Chains in Local Labor Markets

Does "Trickle Down" Work? Economic Development Strategies and Job Chains in Local Labor Markets

Synopsis

The authors explore a new framework for evaluating economic development projects. This framework is based on a job-chain approach. Each new job created by an economic development incentive is filled by an employee who leaves behind another job. In turn, that job may be filled by someone who leaves behind their old job, etc. Such job chains end when an unemployedworker, someone not previously in the labor force, or an in-migrant to the labor market takes a vacancy. Job chains are the mechanism for observing and measuring "trickle down". The job trains model developed in this book presents new insights into local economic development evaluation and strategy.

Excerpt

Jobs, jobs, jobs. Across the country, state and local economic development programs have promised to deliver jobs. It may seem self-evident that more jobs are better than less; yet, one can be sympathetic and still ask what a job is actually worth. Who gets new jobs in an area? Wouldn't many of those workers be employed anyway? To what extent do benefits spill over to others in a community? Do gains trickle down to improve the welfare of those most in need?

These are basic questions. Answering them requires both solid theory and well-calibrated empirical estimates. Too often these questions are simply left unaddressed. More often they are answered in only vague terms. Yet, these are crucial issues for evaluating job creation efforts. Gross job counts tell us very little about the efficiency of job generation. In fact, “head counting” can be highly misleading, celebrating high levels of turnover while saying very little about the gains that actually stick in the local economy.

The purpose of this volume is to explore a new framework for evaluating economic development projects. This framework, the job- chain approach, makes far more transparent both the potential justifications for economic development subsidies and the very real limitations that surround such activities. It also allows us a more accurate account of job creation and avoids many of the criticisms that accompany the “numbers games” often associated with economic development evaluations. Charlatan estimates only undermine the credibility of economic development programs, thereby bolstering the inherent reluctance of local officials to submit their programs to evaluative scrutiny.

Economic development projects create new jobs. Each new job can generate a job chain if and when it is filled by an employed worker who leaves behind another vacancy. In turn that vacancy may attract a . . .

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