Area Redevelopment Administration Research Articles

Communities Left Behind: The Area Redevelopment Administration, 1945-1965. By Gregory S. Wilson. (Knoxville: University of Tennessee Press, 2009. xxii, 197 pp. $41.00, ISBN 978-1-57233-664-3.)

In his examination of the Area Redevelopment Administration (ara), Gregory S. Wilson joins a growing list of those who critique America's post-World War II social and economic policies from the Left. Though it hoped to eliminate “pockets of poverty,” the ara, Wilson argues, illustrates how liberal reform in the United States has proved inadequate in its attempts to solve capitalism's inequities. Rooted in Cold War liberalism, which failed to recognize structural problems in the nation, the ara adopted a Keynesian approach in leveraging private investment to create jobs and stimulate economic growth at the local level. This, reformers believed, would raise “depressed areas” out of poverty. Although the ara focused on public works, such as water and sewage systems, parks, and public buildings, Wilson correctly concludes that it never addressed the issues that precipitated chronic poverty and unemployment in places such as Indian reservations and central Appalachia. Rather, ara policies actually limited national collective action by furthering the perception that “other” places existed “within an otherwise prosperous, beneficent political economy” (p. 150).

Resource constraints and regional development policy

Regional development policies in the United States-as well as those in Great Britain, several Western European countries, and some countries in South America-were formulated at a time when economists and policy makers focused almost exclusively on demand considerations. The task, as it was then envisaged, was one of stimulating the regional demand for resourcesespecially human resources-in excess supply. Out of this approach came a variety of programs to encourage investment in depressed areas. In most countries regional development policy presupposed continued growth of the national economy. Specific policies were designed in some countries to direct part of the new investment insured by growth to areas of above-average employment and below-average income. In the U.S., the initial approach (under the Area Redevelopment Administration) was one of direct public investment in productive facilties in depressed areas, with the caveat that these facilities were not to draw down existing capacity in other regions. In Great Britain, however, the policy was one of directing new investment away from crowded areas to those with excess labor. Similarly, Brazil developed a unique fiscal incentive program to shift investment from the expanding South to the lagging North [Hirschman, 1968]. Later, in the U.S., under the Economic Development Administration, policy shifted from direct investment to investment in public facilities in development areasJ In all cases, however, the emphasis was on stimulating aggregate effective demand-in the Keynesian sense-in development areas. This paper will evaluate these policies within the framework of emerging supply constraints. Georgescu-Roegen's entropic bio-economic analysis of the economic process is used as a background for the discussion of regional policy. The paper concludes with an extensive discussion and critique of U.S. regional policy, and with the direction-as I see i t tha t future regional policy should take.

Federal Aid and Area Redevelopment

FEW people, if any, would quarrel with the objective of federally directed programs to alleviate poverty in economically depressed areas. Similarly, few would argue that the federal government has no place in fashioning the economic destiny of the Nation. However, in deciding on the role to be assigned to the federal government, it is obviously desirable to discover whether, in practice, the governmental machinery will actually operate in such a way as to bring about the results which it is hoped to achieve by any given governmental program. The following article is a short report of the findings of a research project that evaluated the actual decisions about the allocation of aid made by the Area Redevelopment Administration as compared with the apparent intent of the legislature in creating this agency. The Area Redevelopment Act1 elicited Federal assistance in the form of loans and grants to alleviate structural unemployment and underemployment in redevelopment, or depressed areas, throughout the United States. It authorized, as an experimental measure, the establishment of the Area Redevelopment Administration (the ARA) within the Department of Commerce to carry out the legislative intent. ARA began operations in 1961 and was terminated in August, 1965, although its functions were absorbed by the Economic Development Administration. By 1955 it had become apparent to many legislators and others that all communities in the United States were not sharing in the general prosperity of the Nation. Some urban areas, such as the coal mining regions of West Virginia, for example, were suffering from structural unemployment. Other rural areas with low incomes were not sharing in the general prosperity because of disguised unemployment, or underemployment. These conditions became a matter of public concern in 1955 and legislation was finally passed in 1961 which, among other things, specified the criteria to be used in qualifying an area for assistance under the program. Redevelop-

The Fiscal Response to Intergovernmental Transfers in Less Developed Areas of the United States

PpTHE GROWING dependence of the local public sector on intergovernmental aid and the current interest in new forms of aid to be directed to the development of slower growing regions, such as Appalachia, make an increased knowledge of the relationship between these intergovernmental grants and the actions of the local public sector of particular importance. Have these intergovernmental grants increased or decreased the activity of the local public sector? Is there a discernable difference in the impact of federal as opposed to state aid and in the impact of the programs among individual states? One method of measuring the effect of aid programs would be to consider the relationship between these transfers and expenditure levels.' In this paper, however, the focus is on the impact upon the proportion of locally received income disbursed to the public sector or local fiscal effort. Consideration of this particular relationship is useful because of the interest centered on local fiscal effort in the literature on intergovernmental relations. As intergovernmental aid is only one of the several factors which should bring about changes in the level of local fiscal effort, multivariate regression analysis is used to estimate the impact of all these factors. Before considering the details of the multivariate analysis, a review of the nature of the expected relationship between the local fiscal effort and intergovernmental transfers is useful. For lack of a better model let us assume that local governments complement the operation of the private market in providing goods which the private market cannot effectively handle. Attacking the problem in this framework means that the effect of an increase in intergovernmental transfers on fiscal effort can be thought of as the result of a combination of three factors: (1) the marginal evaluation by the community of the benefits of public consumption versus private actions concerning present or future private consumption and work effort or leisure, (2) the degree of legislated controls and restrictions over the use of transfers imposed by the donor jurisdiction, and (3) the institutional structure. Any community has available to it a package of state and federal aid programs. Some of these programs are tied to expenditure levels or require local matching as a prerequisite for participation. community is able to purchase an additional amount of a specific public good at a discount. actions of the community will reflect both an income and substitution effect. If the community chooses to increase its consumption of the cheaper public good, it will have to raise its fiscal effort. Other aid programs fall into a category of income grants that are not encumbered by matching provisions. It would seem reasonable to assume that a community would spend part of this additional income on public goods. In the process of making the remaining income available for private uses local fiscal effort as defined in this paper must be reduced. This means that aid has some positive effect on public expenditures, but some of the aid is used as a substitute for local charges. If more than one type of public service is being provided, adjustments may take * author is Assistant Professor of Economics and Research Associate in the Bureau of Business and Economic Research at the University of Maryland. This research, undertaken while the author was at the University of Pittsburgh, was supported by Area Redevelopment Administration Technical Assistance Grant No. Co-6042. Computations performed at the University of Pittsburgh Computation Center were partially supported by National Science Foundation Grant No. G-11309. author is indebted to Professors Harvey Brazer, George Break, Jerome WVells, George Green, and Alarina v. N. Whitman for their helpful criticism, and to William Duffy for his assistance in collecting data. 1 For some recent direct estimates of the effect of intergovernmental grants on the expenditures of specific types of jurisdictions see Edward F. Renshaw, Note on the Expenditure Effect of State Aid to Education, Journal of Political Economy (Apr. 1960), 170-174; S. Sacks and R. Harris, The Determinants of State and Local Government Expenditures and Intergovernmental Flows s of Funds, Nratio,tal Tax Jouirnal, (MIarch 1964), 75-85; and George A. Bishop, Stimulative versus Substitutive Effects of State School Aid in New England, National Tax Journal (June 1964), 133-143.

The Accuracy of Area Unemployment Estimates Used to Identify Depressed Areas

Examines the accuracy of the unemployment estimates used by the United States Area Redevelopment Administration for designating redevelopment areas. Description of the formula used by the Bureau of Employment Security (BES); Accuracy of the estimates; Comparison of the estimates from the Bureau of Census with that of BES for a number of labor market areas in Oklahoma; Causes of the differences between the estimates across the entire BES unemployment. (Abstract copyright EBSCO.)

Book Review: Federal Aid to Depressed Areas, An Evaluation of the Area Redevelopment Administration by S. A. Levitan, Johns Hopkins, 1964, pp. 268, 56/-

Book Review: Federal Aid to Depressed Areas, An Evaluation of the Area Redevelopment Administration by S. A. Levitan, Johns Hopkins, 1964, pp. 268, 56/-

Wage Adjustments in the Appalachian States

* author wishes to thank R. F. Adams, A. E. Fechter, and G. R. Green for the many helpful comments they have provided. research for this paper was supported by funds provided by an Area Redevelopment Administration Technical Assistance Grant. 1 A. W. Phillips, The Relation Between and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957, Economica, November 1958, pp. 283-99. For a recent application of the Phillips analysis, as well as reference to most of the previous studies, see William G. Bowen and R. Albert Berry, Unemployment Conditions and Movements of the Money Wage Level, Review of Economics and Statistics, May 1963, pp. 163-72. 2 Philip Ross, Labor Market Behavior and the Relationship Between and Wages, Industrial Relations Research Association, Proceedings, 1961, pp. 275-97. In addition to the explanations given by the discussants for the negative results obtained by Ross, his results can also be explained simply on the basis of an inadequate measurement of unemployment. Ross uses the letter (BES) classification for his measure of the unemployment rate. numerical rate is taken to be the mid-point of the range covered by each letter grade. range of actual unemployment rates covered by each letter grade is quite wide, and it is surprising when Ross remarks, A surprising number of markets had no change in unemployment from one year to the next (p. 285). Recently a study of local labor markets in Canada has been published by S. F. Kaliski, The Relation Between and the Rate of Change of Money Wages in Canada, International Economic Review, January 1964. levels and changes in the unemployment ate.3 process which is being described is essen ially one of price adjustment to existing and expected conditions of market excess supply or demand. price in the labor market is the wage rate, and expected excess demand or supply is measured by the unemployment rate and changes in this rate. use of present and/or past rates of unemployment, along with changes in these rates, must be considered as a proxy for expected future conditions in the labor market. In

Federal Aid to Depressed Areas: An Evaluation of the Area Redevelopment Administration.

Federal Aid to Depressed Areas: An Evaluation of the Area Redevelopment Administration.

Book Review: Labor Economics: Federal Aid to Depressed Areas: An Evaluation of the Area Redevelopment Administration

Book Review: Labor Economics: Federal Aid to Depressed Areas: An Evaluation of the Area Redevelopment Administration

Federal Aid to Depressed Areas: An Evaluation of the Area Redevelopment Administration.

Federal Aid to Depressed Areas: An Evaluation of the Area Redevelopment Administration.

Book Reviews

Abstract Abstract Beyond The Melting Pot by Nathan Glazer and Daniel Patrick Moynihan M.I.T. Press and Harvard University Press, Cambridge, Mass., 1963. vii + 360 pp. $5.95. Anonymous (20th Century) by Leonardo Ricci translated by Elisabeth M. Borgese George Braziller, Inc., New York, 1962. 254 pp. $5.00. Federal Aid to Depressed Areas: An Evaluation of the Area Redevelopment Administration by Sar A. Levitan: The Johns Hopkins Press, Baltimore, 1964. 268 pp. $6.95. The New Towns: The Answer to Megalopolis: by Sir Frederic J. Osborn and Arnold Whittick McGraw-Hill Hook Co., New York, 1963. 376 pp. $12.50. Cluster Development: by William H. Whyte: American Conservation Association, New York, 1964. 130 pp, Illus., $3.00. Housing Markets and Public Policy: by William G. Grigsby: University of Pennsylvania Press, Philadelphia, 1963. 346 pp. $6.50. The Future of Old Neighborhoods: by Bernard 1. Frieden: M.I.T. Press, Cambridge, 1964. viii + 209 pp. $7.50. The Withering Away of the City: by York Willbern: University of Alabama Press, University, Ala., 1964. 138 pp. $3.95. Location and Land Use: Toward a General Theory of Land Rent: by William Alonso: Harvard University Press, Cambridge, Mass., 1964. 210 pp. $5.50. Traffic in Towns: a Study of the Long Term Problems of Traffic in Urban Areas: reports of the Steering Group and Working Group appointed by the Minister of Transport, Great Britain: Her Majesty's Stationery Office, London, 1963. 223 pp. 2 pounds 7 shillings. Notes on the Synthesis of Form: by Christopher Alexander Harvard University Press, Cambridge, Massachusetts, 1964. 134 pp. $6.75.

Area Redevelopment Programs for Economic Growth

Abstract Under the Area Redevelopment Act of 1961, redevelopment areas—generally counties —prepare Overall Economic Development Programs in order to be eligible for assistance from the Area Redevelopment Administration. Despite many worthwhile achievements under the Act, the strong emphasis on county units has limited the effectiveness of development programs. ARA' s efforts are spread thin over almost 900 counties, many of which have little potential for growth. A broader approach, grouping counties into more viable “redevelopment regions,” would reduce the number of units with which ARA deals, permit greater attention to each unit, and result in some growth potential for every region. With this approach, which might constitute a second stage of area redevelopment planning, the ARA could make greater and more lasting contributions to economic growth.