Place-Based Policies: Helping Places or People?

The debate over whether governments should target help at struggling regions or at people wherever they live, and evidence from programmes like the Tennessee Valley Authority.

When a region struggles, should governments help the place, by investing in its economy, or help the people, by giving them skills and support to move where opportunities are?

People-based policies

People-based policies support individuals regardless of where they live: education, training, unemployment benefits, cash transfers and help with moving. Many economists traditionally favoured this approach, arguing it helps people directly and does not trap them in declining areas.

Place-based policies

Place-based policies target particular regions: infrastructure, business incentives, special economic zones, relocating government offices or universities. Supporters argue:

Many people cannot or will not move, due to family, housing costs or attachment to their communities.
Declining places impose costs on everyone who lives there.
Some places have untapped potential that investment could unlock.

The Tennessee Valley Authority

A famous example is the Tennessee Valley Authority, created in 1933 in the United States during the Great Depression. It built dams, power plants and infrastructure in a very poor region. A study by Patrick Kline and Enrico Moretti found that the TVA led to lasting gains in manufacturing employment in the region, though national benefits were smaller, since some gains came at the expense of other regions.

Mixed evidence

Enterprise zones, which offer tax breaks to businesses in deprived areas, have had mixed results; some studies found jobs were created, others found firms simply relocated from nearby areas.
EU regional funds have supported growth in poorer regions in some countries but not others.

The emerging view

Many economists now accept that both approaches have roles. Place-based policies may be most effective when they build lasting assets, such as infrastructure, universities and skills, rather than just subsidising firms.

The relocated office

A government moves a large public agency from the capital to a struggling city. Thousands of well-paid jobs arrive, supporting local shops and services. Critics note the jobs came from elsewhere, not new growth. Supporters argue spreading public jobs helps rebalance the economy and brings skills to the region.

Thinking regional policy always creates new jobs

Some place-based policies mainly shift jobs from one area to another. Judging their success requires asking whether they create new activity or just move it around.

Key takeaways

People-based policies help individuals; place-based policies target regions.
Many people cannot easily move, supporting the case for place-based policies.
The Tennessee Valley Authority created lasting local manufacturing gains.
Evidence on enterprise zones and regional funds is mixed.