Type II Policy and Mandated Benefits in Economic Development

Economic development policy in the United States is dominated by public subsidy and incentive programs designed to induce private sector investment. The market-generated benefits of increased private investment are assumed to justify the public expense of such programs. The author argues that a second type of development policy exists, called Type llpolicy, that is based on a conflicting set of assumptions and that mandates public benefits by requiring private developers to provide direct economic and social goods. An analysis of policy in 281 localities shows that Type II programs are widespread, are strongly associated with higher levels of community-based activity in the economic development arena, and are not restricted to prosperous locations.