n.V1-7.19 | INFRASTRUCTURE AND PUBLIC GOODS
01| The same survey that finds enterprise zones decidedly mixed finds something else promising: infrastructure expenditure, and investment in higher education and university research. And the explanation Neumark and Simpson offer for the difference is more useful than the finding itself.
02| These work, in their reading, because of their public-goods character. What is created cannot be captured by a single firm, and does not disappear when the subsidy ends. A road, a water system, a university department — the thing exists afterwards, is available to everyone in the area, and continues producing value with no further payment to anyone.
03| That is a design principle rather than a sector preference, and it cuts across every chapter in this book part. Ask of any intervention: when the money stops, what is left that keeps working? A tax break leaves nothing, because the break was the intervention. A trained worker who leaves is gone. A committee with no revenue dissolves. A road remains a road — although, as the Indonesian material showed, only until it needs maintaining, which is where the same principle turns on the same programmes.
04| The second development here is intellectual rather than empirical, and it matters for how the whole place-versus-person argument is now conducted. The orthodox economic position for decades was that spatial policy is inefficient: people are mobile, subsidising a declining place traps them in it, and the correct response is to help people move to where the work is. Help poor people, not poor places.
05| In 2018 Austin, Glaeser and Summers reopened it directly, asking whether permanent economic divisions across space should lead economists to rethink their traditional scepticism about place-based policy. Glaeser had been among the most prominent advocates of the orthodox view, which is worth noting because it is rare in this literature for a position to be revisited by the person who established it.
06| Their empirical hook is specific and consequential: increases in labour demand appear to have larger employment effects in places where non-employment has historically been high. A job created in a struggling area draws in more people who were not working than the same job created in a booming one. If that holds, the efficiency case against place-based policy weakens considerably, because the same intervention buys more employment where things are worst.
07| Two cautions, and they are not small. This is one paper in an active argument, not a settled reversal. And it concerns declining American regions — former manufacturing towns with formal labour markets, unemployment insurance, functioning municipal government and property registers — not informal urban settlements in middle-income countries, which differ in almost every respect that the mechanism depends on.
08| That caveat applies to this entire pair of chapters, and to the pair that follows. The place-based literature is overwhelmingly American and European. Whether the public-goods finding holds in an informal settlement, where the infrastructure question is entangled with tenure, occupancy and who is permitted to build, has not been established. The literature closest to that context — evaluations of slum upgrading in Brazil, India, Indonesia, Kenya — is absent from the research assembled here, and its absence is a gap in this book part rather than in the world.
09| What is nonetheless usable: the distinction between interventions that create something uncapturable and permanent, and interventions that rent an outcome for as long as the payments continue. That distinction survives the transfer between contexts even where the specific findings do not.
