Place Based Policies, Heterogeneity, and Agglomeration

摘要

Place based policies, though hardly new, have just begun to attract serious attention from economists. As evidence on the effects of these programs begins to trickle in, it is useful to revisit the theoretical rationale for spatially targeted subsidies. Why after all should governments pay firms to move to less productive areas and incentivize workers to live in neighborhoods they don't like? And who ultimately benefits from these subsidies in a general equilibrium environment? I study here some stylized models of spatial equilibrium designed to answer these questions. My conclusions are shown to depend critically upon the degree of preference heterogeneity in the population and the structure of any agglomeration economies.