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Does "trickle down" work?

Economic development strategies and job chains in local labor markets

Joseph Persky, Daniel Felsenstein og Virginia Carlson

W.E. Upjohn Institute 2004, 179 s. ISBN 0-88099-308-1
Bogomtale fra forlaget.

State and local economic development programs offer the promise of new jobs, yet those examining the employment-related results of such programs are often left with many questions. Who got the new jobs? Wouldn’t many of those workers be employed anyway? What are the overall benefits to the community? Do gains trickle down to those most in need?

These are basic questions that, because of difficulties in evaluating the effects of state and local economic incentives, are often left unanswered. This book, however, offers a solution to this problem. Persky, Felsenstein, and Carlson explore a new framework for evaluating state and local economic development efforts. They propose a method, referred to as the “job-chains approach,” that they say clarifies the potential justifications for economic development subsidies as well as the limitations surrounding these efforts. This innovative approach addresses not only the number of job vacancies created as a result of a subsidized business investment or expansion, but also the extent to which gains are achieved by the unemployed and the underemployed, whether skilled or unskilled.

Application of the authors’ job-chains model leads to novel insights into local economic development evaluation and strategy. First, where standard employment multipliers focus exclusively on horizontal multipliers -- increasing demand for locally produced products and services -- the job-chains model identifies the existence of vertical multipliers, or links that work through job vacancies created by job changers. Second, using the job-chains model allows the authors to develop a technique for evaluating the welfare value of employment creation. The mechanics of job chains result in this value spreading more broadly across the local population than the original new jobs that created the chains. And third, the job chains perspective affords new insights into labor market dynamics by introducing individual preferences and behavioral probabilities into job choice.