Targets of State and Local Economic Development Policy

S and local policymakers typically have three targets for their economic development policies: outside businesses, existing businesses, and new start-up businesses. Attracting outside businesses— especially large manufacturing plants—has long been a popular economic development activity, but increasingly this approach has come under fire.1 As policymakers reexamine the effectiveness and appropriateness of economic development policy, an understanding of how resources are currently allocated among the three main targets is essential. Unfortunately, little is known about how much emphasis state and local economic development policy places on each of the three main targets. For this reason, the Federal Reserve Bank of Kansas City recently surveyed a large number of economic development organizations to determine what types of businesses they are targeting. The survey results show that the most important target of economic development policy is existing businesses, and the emphasis on this target appears to be increasing.