An Analysis of Infrastructure Provision and Local Economic Development Policy

Abstract

While the provision of infrastructure has been a traditional role for local (state and city) government, it is shown that the commitment to such infrastructure provision has waned as a result, in part, of recent political and economic events. Given the current political economy, infrastructure investments may have to be justified on the basis of their ability to stimulate local economic development and create jobs–even though many direct economic development policies have been implemented based on their plausibility rather than on their proven efficacy. To establish the relationship between infrastructure and economic growth during the 1962-to-1982 time period, a policy evaluation model is specified and tested for a sample of cities. The results suggest that infrastructure does, in fact, stimulate job growth. Thus, a more comprehensive analysis of the economic development process is called for so that infrastructure and more-direct job-creation policies can be compared. It would seem that the recent dimin...