Neo-liberalism at the Subnational Scale: Local Governments Growth and Redistribution Policy in an Era of Decentralization

POVERTY AND PLACE ACROSS THE UNITED STATES:DO COUNTY GOVERNMENTS MATTER TO THE DISTRIBUTION OF ECONOMIC DISPARITIES? Presented by: Mark D. PartridgePartridge.27@osu.edu; http://aede.osu.edu/programs/Swank/

Coauthors: Linda Lobao, Wilner Jeanty, & David Kraybill

Keynote: Poverty and Regional Analysis Workshop50th Annual Meetings of the Southern Regional Science Association Pre-ConferenceJ. Norman Efferson Series LectureLouisiana State University February 3, 2011This research received partial support from NIH award R21-HD47943 to the Initiative in Population Research at The Ohio State University.Partridge--LSU1Purpose of the StudyContribute to the poverty-and-place literatureat the sub-national scale. First study to question the impacts of counties as local governments:Are county governments a missing link in this literature?Do county governments influence local populations economic well-being?Most novel part in my opinion is whether it is good policy that matters or government capacity that matters. Focus on job growth, poverty rates, and household income in the 2001-2007 period.

Partridge--LSU2Outline of the PresentationI. The poverty-and-place literature and countiesII. More interest in local govt role in reducing povertyIII. Conceptual debate about the effects of local govts on poverty and other forms of well-beingIV. Empirical analysis: Do county govts influence local well-being? Focus on countys institutional capacity and policy initiatives directed to workforce developmentNational analysis of county govts using secondary data and unique primary survey dataV. ConclusionsPartridge--LSU3Spatial Clustering of PovertyPersistent patterns that is worse near the DeltaPartridge--LSU4Partridge--LSU5

Source: http://www.census.gov/did/www/saipe/data/statecounty/maps/2009.html downloaded Jan 20, 2011.5

1969197919891999

Family Poverty (terciles) Partridge--LSU6Family Poverty Clustering (Local Morans I)

Partridge--LSU7I. Poverty across U.S. Localities: LiteratureThematic concern with factors explaining sub-national economic disparity (e.g. poverty rates, income levels, or income inequality)Common independent variables (see paper for cites): economic structure (quality & quantity of local employment) demographic attributes (e.g. age, race/ethnicity, family structure reflecting vulnerability to poverty) geographic (agglomeration, regional context) Methodological protocols:counties most commonly used unit-of-analysisquantitative studies using various regression-type modelsPartridge--LSU8Poverty across U.S. Localities: LiteratureCommon limitations in this literature:Weber et al. (2005); Partridge and Rickman (2006) Studies vary in degree to which spatial processes incorporatedspatial econometrics, GWR, etc. Endogeneity and self-sorting are not usually considered. Relatively little attention to govt, even less to local govt

Partridge--LSU9Partridge--LSU10Poverty across U.S. Localities: LiteratureCounties the empirical sample of choice:Isserman et al. 2009; Peters 2009 mostly fixed geographic boundaries considerable secondary data spatial scale(incorporates residence and work, most people live and work in the same county) counties include both slow & fast growing (urban/rural) places (Desmet and Fafchamps 2005)

Local Poverty: The Body of LiteratureCounties are also important units of govt:Lobao and Kraybill, 2005 cover more residents than other local governments, such as municipalitiesnow fastest growing U.S. general purpose governmentprovide important human services and administer welfare (the TANF program) for many Americans

Partridge--LSU11Poverty across U.S. Localities: LiteratureWhy are counties overlooked as units of govt? Conceptual gaps in the poverty-and-place literature evolved with a focus on economic and demographic determinants Federal government receives most attentionWar on Poverty most vivid example Americans see the state as the federal stateSheingate (2010); (Peterson 1981) Lack of county govt data (Weber et al., 2005)

Partridge--LSU12II. More Interest in Local Govt Role in Reducing Poverty Policy interest in local govts from both right and left sides of political spectrumThe role for local govts to help reduce poverty has gained traction with greater interest in social capitalDecentralization has increased the functional responsibilities of local govts. Rodriguez-Pose and Gil (2005) New policy-experiments undertaken by local govts Place-based poverty policy increasingly recognized by some as an important adjunct to people-based policy. Partridge and Rickman (2005, 2006)

Partridge--LSU13III. Local Govt and Economic Well-Being: Differing ViewsThe Case for the Beneficial Effects of Local GovtGovt has a role in society beyond providing pure public goods, e.g., greater economic growth and reducing poverty. Bartik (1991); Lobao and Hooks, (2003); Volscho and Fullerton (2005)1. The Institutional Capacity of Local GovernmentGovernment provides two overlapping functions: --an economic growth function (job creation)-- a social equity function: strengthens the local social safety net, protects residents from destabilizing market forcesWhere govt is institutionally stronger (i.e., with greater bureaucratic and fiscal capacity to operate effectively), its beneficial influence is greaterpoverty should be lower and household income higher. Lobao and Hooks 2003

Partridge--LSU14III. Local Govt and Economic Well-Being: Differing ViewsThe Case for the Beneficial Effects of Local Govt 2. Specific Policies and Programs of Local GovtTiebouts (1956); Rodriguez-Pose and Kroijer (2009) Economic development programs aimed to local business and public services directed to the local labor forceSuccessful economic development programs should create jobs, in turn, raising family incomes, and reducing poverty Programs directed to community workforce: can build human capital, promote family well-being, increase community cohesion, and reduce poverty (e.g., transportation and childcare) (Blank 2005).Partridge--LSU15III. Local Govt and Economic Well-Being: Differing ViewsThe Case for Null or Negative Effects of Local Govt Researchers build their arguments from one of two vantage points, grounded in policy-schools from the right and the left. A. The limited-govt view sees market and state as intrinsically competitive, emphasizes govt failures, see Okun, (1975); Buchanan, (1986) As local govts expand institutionally beyond providing true public goods and to undertaking social equity functions, they adversely affect local culture and labor supply and can turn localities into welfare magnets (e.g. Murray 1984). Programs directed to low-income people are particularly misdirected in catering to underperforming/undeserving populations, which over the long term undercuts growth. Partridge--LSU16III. Local Govt and Economic Well-Being: Differing ViewsThe Case for Null or Negative Effects of Local Govt B. Critical political economy literature view of local govt Recognizes govt as an important institution for ensuring well-being and alleviating poverty but stresses the inadequacies of local govts. Critique leveled against devolution of federal welfare (TANF)/social programs to program to states and counties. (Schram 1999) Also critique leveled against local economic development programs directed to businesslocal elites rather than low-income people capture any gains (Storper and Manville, 1986; Urban Studies)

Partridge--LSU17Partridge--LSU18III. Local Govt and Economic Well-Being: Differing ViewsIn sum, we test two opposing hypotheses for county govts: Benefits of county governmentWhere county govt is larger and institutionally stronger (i.e., with greater bureaucratic & fiscal capacity), its beneficial influence is greatergreater job growth & income & lower poverty rates.County-govt programs directed to business and to the community workforce should be related to greater job growth, lower poverty, and higher household incomes. Related Hypothesis: Is it Policy or Govt Capacity that matters?

Limitations of county governmentCounty govts capacity and programs have at best no effects --at worst, detrimental effects on job growth, poverty rates, and household income.

IV. Empirical AnalysisData: Counties from all 46 contiguous states with functioning county govts, primary data collected from 62% of counties, along with secondary data (N=1514)Modeling Relationships follows poverty literatureControl for spatial dependency with a spatial lag model in a GMM approach.Models seek to minimize endogeneity (e.g. job growth estimated with instrumental variable, industry mix)

Partridge--LSU19IV. Empirical AnalysisModeling RelationshipsExamine four indicators of economic well-being: job growth (2001-2007) individual poverty rate (2007)poverty rate of children under age 18 (2007) household median income (2007)Base modelsrobustness checksStandard diagnostics (no high multicollinearity, etc.)Partridge--LSU20

Partridge--LSU212007 Poverty Rate by CountyIV. Empirical AnalysisIndependent Variables (base-model controls for county conditions)1.Local Economic Structure (1990s)Percent manufacturingAverage job growth of contiguous counties Government as a local employer (federal, state, and local)2. County Demographic Characteristics (1990s) Percent of population: < age 18 and age 65 years and > Percent of black and Latino populations Education: age 25 with a college degree or +% Female-headed households with children under age 183. Agglomeration Log of population densityDistance to nearest MSA in 2000Poverty pocket: percent of 8 nearest counties with 1997 poverty rate > 20%County 2000 population if county is in an MSA or nearest MSA otherwise.Distance to reach a large MSA (population at least 250,000)

Partridge--LSU22IV. Empirical AnalysisDependent County Govt Variables: County Capacity Administrative resources: --County government size (full-time employees)--Economic development professional on staff --Grant writer on staffFiscal resources:--General revenue/general expenditures (higher=greater fiscal capacity) --Revenue per capita Decentralizationcounty autonomy: --State and federal/own source revenue (lower=greater fiscal autonomy)--# of governments operating in county (lower=less fragmentation, stronger county) --Devolutioncounty located in state that devolves welfare to counties

Partridge--LSU23IV. Empirical AnalysisDependent Variables: County Government PolicyThree Contrasting Types of Development Policy that are debated--Traditional business attraction: (7 policy tools, e. g. tax abatements) --Alternative (new wave) business economic development: (8 policy tools, e.g. business incubators, new technologies) --Programs directed to local workforce: (10 item community support index e.g., workforce development programs for low-income workers, childcare services)Additional Measures: County Economic Development Focus --Business incentives (13 incentives, e.g. local designated enterprise zones, low-cost loans) --Proportion of economic development budget for small business development (index)--County-created industrial parkPartridge--LSU24IV. Empirical Analysis: ResultsJob Growth: is positively associated with:County government capacity is larger: Larger governmentsMore centralized county govts (less fragmented by many local govts) More autonomous (less dependence on state and federal funds) These findings tend to support the position outlined about beneficial effects of stronger county govts. Note: higher revenue extracted per capita, lower job growth (suggests taxation dampers growth)Policy: Where a larger number of new wave policies are in use-- providing an indication they may support job growth. But where the county provides fewer public services for the workforce Note: no effects of: traditional, business attraction; industrial incentives; industrial park; or spending focused on small business development

Partridge--LSU25IV. Empirical Analysis: ResultsGeneral Poverty Rate are negatively related to:Capacity is greater: Staff: economic development professional on staff Fiscal capacity: higher per capita revenue (control for economic structure) Greater autonomy: less dependence on state/federal funds; welfare devolved to countyThese findings tend to support the position outlined about beneficial effects of stronger county govts. Little effect of policy:Except a somewhat positive effect of new wave policies (p