Poverty and Local Governments: Economic Development and Community Service Provision in an Era of Decentralization

Abstract

Social scientists have given substantial attention to poverty across U.S. localities. However, most work views localities through the lens of population aggregates, not as units of government. Few poverty researchers question whether governments of poorer localities have the capacity to engage in economic development and service activities that might improve community well-being. This issue is increasingly important as responsibilities for growth and redistribution are decentralized to local governments that vary dramatically in resources. Do poorer communities have less activist local governments? Are they more likely to be engaged in a race to the bottom, focusing on business attraction activities but neglecting services for families and working people? We bring together two distinct literatures, critical research on decentralization and research on local development efforts, that provide contrasting views about the penalty of poverty. Data are from a unique, national survey of county governments measuring activity across two time points. The most consistent determinants of activity are local government capacity, devolutionary pressures, and inertia or past use of strategies. Net of these factors, levels and changes in poverty do not significantly impact government activity. There is no evidence the nations' poorest counties are racing to the bottom. Findings challenge views that poverty is a systematic structural barrier to pursuing innovative economic development policies and suggest that even poorer communities can take steps to build local capacity, resources, and networks that expand programs for local businesses and low-wage people. Copyright (c) 2009 Wiley Periodicals, Inc..

Why Do Localities Provide Economic Development Incentives? Geographic Competition, Political Constituencies, and Government Capacity

“…Dependence on outside revenue sources (Lobao and Kraybill ; Minkoff ) and dependence on corporate taxes (Jenkins, Leicht, and Wendt ) are found to be positively related to economic development activities. Government capacity and the presence of economic development professionals working for local governments have a positive impact on the breadth of economic development activities undertaken by local governments (Basolo and Huang ; Fleischmann, Green, and Kwong ; Lobao and Kraybill ; Sullivan ), suggesting governments with limited resources and bureaucratic capacity may face significant barriers to policy implementation. Reese and Malmer () find state restrictions have little effect on the volume of local government economic development activities, but shift the type of activities undertaken.…”

Governance, Policy Innovation, and Local Economic Development in North Carolina

“…More convincingly, he found that having a strategic plan for economic development and using a public–private partnership as the lead agency are particularly strong predictors of collaborative activity. Most recently, Lobao and Kraybill (2009) used multivariate analysis to discover that certain measures of government capacity among counties, including interlocal collaboration and citizen involvement, are significant determinants of alternative “new wave” economic development activities. Based on the findings from previous studies, the tendency for local governments to employ innovative management and implementation techniques seems to be a logical correlate to the use of innovative economic development strategies and policy tools.…”

A Case Study of Local Government Implementation of the Ward Based Local Economic Development (LED) Program

“…Decentralization envisages the link between poverty and the local government (Labao and Kraybill, 2009). As a result, the policies and strategies designed to deal with poverty reduction are all embedded in decentralization (May, 2010).…”