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When is a Cost Really a Benefit? Local Welfare Effects and Employment Creation in the Evaluation of Economic Development Programs

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  • Daniel Felsenstein

    (Hebrew University of Jerusalem)

  • Joseph Persky

    (University of Illinois at Chicago)

Abstract

This article claims that the local welfare effects of employment generation are often treated inadequately in the evaluation of economic development programs. Opportunity costs of labor are often either ignored or overstated, resulting in misleading indicators of welfare changes. Appropriately accounting for these costs requires recognizing employment creation as a benefit in terms of the chain reaction that it sets off in the local labor market. This article uses the concept of “job chains†and describes the different labor market circumstances in which they are likely to form. The local development of these chains, the impacts of in-migrants on their length, and the likelihood of their completion within the local area are all particularly important economic development issues with public policy implications. The article discusses the empirical estimation of these chains and their implications for evaluating the welfare impacts of alternative economic development projects.

Suggested Citation

  • Daniel Felsenstein & Joseph Persky, 1999. "When is a Cost Really a Benefit? Local Welfare Effects and Employment Creation in the Evaluation of Economic Development Programs," Economic Development Quarterly, , vol. 13(1), pages 46-54, February.
    • Handle: RePEc:sae:ecdequ:v:13:y:1999:i:1:p:46-54
    DOI: 10.1177/089124249901300107
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    References listed on IDEAS

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    1. Cees Gorter & Jan van Ours, 1994. "Matching Unemployment And Vacancies In Regional Labor Markets: An Empirical Analysis For The Netherlands," Papers in Regional Science, Wiley Blackwell, vol. 73(2), pages 153-167, April.
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    5. Courant, Paul N., 1994. "How Would You Know a Good Economic Policy if You Tripped Over One? Hint: Don't Just Count Jobs," National Tax Journal, National Tax Association;National Tax Journal, vol. 47(4), pages 863-881, December.
    6. Brian J. Cushing, 1993. "The Effect of the Social Welfare System on Metropolitan Migration in the US, by Income Group, Gender and Family Structure," Urban Studies, Urban Studies Journal Limited, vol. 30(2), pages 325-337, March.
    7. Johnson, Peter S & Thomas, R Barry, 1984. "Government Policies towards Business Formation: An Economic Appraisal of a Training Scheme," Scottish Journal of Political Economy, Scottish Economic Society, vol. 31(2), pages 131-146, June.
    8. Timothy J. Bartik, "undated". "Who Benefits from Local Job Growth: Migrants or Original Residents?," Upjohn Working Papers tjb1993rs, W.E. Upjohn Institute for Employment Research.
    9. James O. Huff & Brigitte Waldorf, 1988. "A Predictive Model Of Residential Mobility And Residential Segregation," Papers in Regional Science, Wiley Blackwell, vol. 65(1), pages 59-59, January.
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    Cited by:

    1. Felsenstein, Daniel & Fleischer, Aliza, 1999. "Capital Assistance and Small Firm Growth: Implications for Regional Economic Welfare," ERSA conference papers ersa99pa395, European Regional Science Association.
    2. Barkley, David L. & Henry, Mark S. & Warner, Mellie L., 2002. "Estimating the Community-Level Impacts of Attracting New Businesses: The Implications of Local Labor Market Adjustments," UCED Research Reports 113334, Clemson University, University Center for Economic Development.
    3. Barkley, David L. & Henry, Mark S., 2002. "Estimating The Community-Level Impacts Of Attracting New Businesses: The Implications Of Local Labor Market Adjustments," REDRL Research Reports 18790, Clemson University, Regional Economic Development Research Laboratory (REDRL).
    4. Barkley, David L. & DiFurio, Ferdinand & Leatherman, John C., 2004. "The Role of A Public Venture Capital Program in State Economic Development: The Case of Kansas Venture Capital, Inc," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 34(4), pages 1-24.
    5. Joseph Persky & Daniel Felsenstein, 2008. "Multipliers, Markups, and Mobility Rents: In Defense of ‘Chain Models’ in Urban and Regional Analysis," Environment and Planning A, , vol. 40(12), pages 2933-2947, December.
    6. Felsenstein, Daniel & Persky, Joseph & Carlson, Virginia, 2002. "Job vacancy chains in metropolitan labor markets," ERSA conference papers ersa02p088, European Regional Science Association.
    7. Laura A. Reese & David Fasenfest, 1999. "Critical Perspectives on Local Development Policy Evaluation," Economic Development Quarterly, , vol. 13(1), pages 3-7, February.
    8. Marla Nelson & Laura Wolf-Powers, 2010. "Chains and Ladders: Exploring the Opportunities for Workforce Development and Poverty Reduction in the Hospital Sector," Economic Development Quarterly, , vol. 24(1), pages 33-44, February.

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