Insights for U.S. Place-Based Policy Supply Chains

Local organizations are central to understanding place-based policy. “The US Place-Based Policy Supply Chain,” by Gordon Hanson, Dani Rodrik, and Rohan Sandu shows how organizations shape who benefits from policies and programs. Place-based policy falls to local organizations because, while federal and state governments set rules and allocate resources, intermediary and community-based actors ultimately interpret, adapt, and deliver these programs on the ground, determining who benefits and how. This reliance reflects decades of decentralization and bottom-up innovation, making local actors central to designing context-specific solutions and sustaining policy impacts over time.

However, government programs rarely cover intermediaries' operational costs, requiring many organizations to rely on budgetary support from private or philanthropic sources. As a result, intermediary capacity is concentrated in larger, wealthier regions with stronger civil society institutions. Local access to credit is a key determinant to the viability of redevelopment programs. Communities without local banks or strong non-profits struggle to access redevelopment programs. Without sophisticated local financial institutions, income flows disproportionately to low-income neighborhoods located within higher-income regions. Thus, there is wide geographic variation in organizational capacity for place-based policy. 

Given the geographic unevenness in place-based policy, consider the following insights at the federal, state, and local level. 

Federal Level

• Lack of agency coordination contributes to wide regional variation in place-based policy. For example, the Economic Development Agency (EDA) lacks a functional mechanism to coordinate decisions with other agencies, such as the Employment and Training Administration, creating operational silos. As a result, regional intermediaries are effectively required to integrated fragmented federal policies, combining otherwise disconnected horizontal policies into a more holistic approach to implementation.
• Federal resource delivery mechanisms tend to favor regions with existing institutional capacity and market strength, rather than those with the greatest need. Competitive grants are more often rewarded to large cities with well-funded non-profit Economic Development Organizations (EDOs). Tax-based tools like Opportunity Zones (OZs) disproportionately attract investment in high-performing areas and real-estate projects. Simultaneously, administrative burden may reduce local intermediary take-up. Historically Underutilized Business Zone (HUBZone) program verification, residency rules, and lengthy application processes impose costs that are difficult for under-resourced firms to absorb, reinforcing these disparities.

State Level

• Quality variability across small business and workforce training programs may lead to limited improvements in economic outcomes. Although evidence is limited, state-level Workforce Development Boards appear to differ widely in their capabilities.
• Business recruitment programs based on tax incentives can undermine regional economic outcomes and strain public finances. A clear example of the limitations of business recruitment incentives is the Kansas–Missouri “border war.” Between 2011 and 2019, the two states offered competing tax incentives to induce firms to relocate across state lines within the Kansas City metropolitan area. In total, 116 companies moved short distances within the same regional economy, with incentives amounting to $335 million. Because these relocations did not generate new economic activity but merely shifted it across jurisdictions, the result was a net drain on the regional economy. This case highlights two broader limitations of business recruitment as a place-based policy tool. First, discretionary incentives can induce a “race to the bottom,” as states strategically increase subsidies to outcompete their neighbors, diverting attention from investments that build long-term capacity, such as workforce development. Second, these incentives can create significant fiscal cost without corresponding economic gains. 
• R&D investments and technological innovation produce the strongest and most persistent regional effects when they are anchored in research universities supported by stable state funding. Unlike short-term or geographically concentrated investments, state-supported universities function as long-term institutional anchors for regional innovation, generating skilled workers and knowledge spillovers over decades. Historical evidence from land-grant institutions and federally funded research programs shows that regions with sustained university funding experience lasting gains in productivity, earnings, and innovation.

Local Level

• Local institutional capacity is a key determinant for place-based policy effectiveness, but it is uneven across regions. Design and reporting burdens privilege local institutions with grant-writing infrastructure and established finance partners, reinforcing disparities in program access and implementation. Recent federal initiatives under the Biden Administration, such as the Build Back Better Regional Challenge, have increasingly emphasized regional consortia, which requires collaboration across firms, universities, workforce providers, and local governments. This approach demonstrate that coordinated regional coalitions can pool resources, share expertise, and jointly implement more comprehensive place-based strategies.
• Workforce development is a central tool for responding to local economic shocks, yet it remains underutilized by displaced workers. Despite the availability of training through community colleges and federal programs, most displaced workers are not enrolled in re-training programs. Career and Technical Education (CTE) programs account for 40% of community college degrees awarded, but only 2% of displaced workers currently enroll in CTE programs. Since these targeted programs can generate substantial earnings gains, low take-up limits the ability of regions to adjust to economic change. Notably, these programs are difficult to scale, and existing systems are not well designed to engage displaced workers. As a result, workforce development often falls short of its potential as a mechanism for local economic adjustment.

Reimagining Place-Based Policy

Despite the scale of place-based programs, the supply system must adequately support the local institutions to distribute these resources at scale. Future strategies may: (1) invest in local institutional capacity; (2) simplify compliance and reduce application barriers; (3) prioritize community partnerships and accountability; and (4) coordinate across federal agencies. Place-based policy reforms will require both a bottom-up and top-down approach to effectively rejuvenate U.S. communities.