Place-Based Policy and Neighborhood Business Density: Impacts of the Community Development Block Grant Program

Abstract

Amid slowing economic convergence between regions and growing disparities within cities, spatially targeted “place-based” policies are often employed to attract businesses and create jobs in economically distressed areas. Yet, many questions remain concerning what type of place-based investments contribute to local business development, and how these investments can be effectively targeted. This paper sheds light on these questions by evaluating the firm impacts of one of the longest running place-based programs in the United States, the Community Development Block Grant. Using panel data on nearly 9,000 ZIP codes across 50 metropolitan areas and two-way fixed effects methods, I examine whether and under what conditions CDBG investments grow the number of businesses in a targeted community. Results suggest that CDBG activities increase business density in a community within five years of investment, with gains primarily driven by economic development and property acquisition activities in ZIP codes with low-to-moderate levels of poverty.