Full Citation

Title: Is Municipal-Level Economic Development Effective? A Study of the Local Economic Development Efforts in the Milwaukee-Racine CMSA, 1977-2007

Citation Type: Dissertation/Thesis

Publication Year: 2011

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Abstract: Local efforts at economic development have increased in the United States over the last three decades. In 1977, 2 of the 55 largest municipalities in the Milwaukee-Racine combined metropolitan statistical area (CMSA) used tax increment financing (TIF) to help pay for development projects. Three had an official Community Development or Redevelopment Authority (CDA/RA) to help coordinate and promote local development. Thirty years later, 43 were using TIF and 24 had a CDA or an RA. Municipal economic development officials and city councils, with the support and/or approval of state governments, often engage in local development and provide incentives to businesses to encourage growth. However, research regarding the substantive efficacy of local incentives in promoting economic development within a given metropolitan area is quite limited.This analysis seeks to partially fill that gap by replicating a regression study first offered by Robert Wassmer in a 1994 paper modeling the effect of local incentives in the Detroit metropolitan area during the 1954 1987 period. The original model has been adapted to the Milwaukee-Racine area, updated with newer data, and refined with the use of more robust statistical method. This research puts TIF, the primary local economic development incentive (EDI) in the Milwaukee-Racine area, into historical context before proceeding to answer the question are levels of economic development in the Milwaukee-Racine CMSA affected by municipal economic development efforts? Economic development efforts are operationalized here as per-capita cumulative municipal spending on TIF projects (categorized as relating to manufacturing, non-retail service, or retail industries) and by the cumulative time a CDA or RA has been active in a given municipality, both derived from original research. The measures are regressed with corresponding levels of local economic development in the manufacturing, non-retail service, and retail industries over the period 1977-2007. The model incorporates controls for important exogenous and endogenous factors including macroeconomic trends and unique local characteristics affecting economic development in order to isolate the relationship of municipal development effort to local economic results. The results indicate that greater spending on improvements financed by tax increments has not been associated with increased manufacturing employment, non-retail service employment, or non-retail service receipts, though TIF was associated with increased manufacturing value added. The effects of CDAs and RAs are more ambiguous. Their presence is found to be significantly positively associated with three development measures, but negatively associated with two others. The patterns observed in the Milwaukee-Racine area from 1977 to 2007 differ in their details from those found in prior research, but the conclusion they suggest is consistent with that from prior work: while local efforts at economic development may have been associated with positive outcomes for particular localities, when the metropolitan region is considered as a whole, local development appears to have been an ineffective anodyne for urban decay. This research suggests that it may in the interest of the State of Wisconsin to consider closer monitoring of the use of local economic development incentives.

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Authors: Finan, John Paul L.

Institution: University of Wisconsin-Milwaukee

Department: Urban Studies

Advisor: Dr. Linda McCarthy

Degree: Master of Science

Publisher Location: Milwaukee, Wisconsin

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Data Collections: IPUMS NHGIS

Topics: Labor Force and Occupational Structure, Migration and Immigration, Other

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