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How local governments prioritize business development differently across communities

“[Our] economic development corp. actively engages in every level of research and outreach to potential developers imaginable.” - Commissioner from a large Pennsylvania County
“We are not large enough to go after businesses” -Councilmember from a small Kentucky town

It is commonly assumed that a key focus of local government is to attract businesses to their communities to create jobs and increase their tax base. However, our recent survey of over 500 local policymakers—in collaboration with Dr. Christopher Poliquin at UCLA and Dr. Young Hou at UVA—suggests that there is a great deal of variation across America in the extent to which local governments prioritize attracting businesses. What explains why some local leaders treat this as a top priority while others do not?

At first glance, the most obvious indicator seems to be population size. As you can see below, 69% of leaders from the largest communities treat attracting businesses as a top priority, compared with only 56% of leaders from the smallest communities.

This may seem counter-intuitive at first—as you might expect smaller communities to have a greater need for local businesses to provide jobs, taxes and services to their communities. There are, however, at least two explanations for this pattern.

One reason may be that representatives from jurisdictions with smaller populations believe that they do not have the resources to attract businesses in the first place, for example, one county commissioner from Minnesota focused on the barrier of having reliable internet in their jurisdiction. “Broadband initiatives are also in process as we understand the critical needs of our local businesses and their reliance on strong, reliable internet...something parts of county lack!"

These towns have a smaller customer base for businesses to sell to, and they likely have less money in the budget to attract businesses through incentives. In our March 2022 survey on this subject, we found that some local governments are not transparent about the nature of these incentives. It may be that this asymmetrical information disadvantages smaller communities who have less financial leverage.

Another reason may be that smaller localities are able to leverage their relationships with larger, nearby communities. Many of the smaller governments represented in our data may be closely associated with nearby urban population centers which they may rely on for certain aspects of public life, especially economically. For smaller communities who are very close to larger towns, it may be less necessary to expend effort attracting business. A councilmember from a Wisconsin town says, “We are largely residential and have many businesses located nearby. Most in the community do not want to attract businesses, other than local restaurants (which aren't feasible due to our size and location).”

To test for this, we further disaggregated the data between communities that are proximate to urban population centers (e.g., within metropolitan or micropolitan areas). The findings below indicate that, in addition to population size, proximity to another urban center is also an important indicator of local government priorities around businesses. In fact, small-population local governments not near urban centers are as likely to prioritize attracting businesses as large-population local governments in urban centers (68% of respondents from both groups). In other words, the necessity of attracting businesses seems to rise in proportion to the distance from an urban population center.

Understanding the reasons for this difference in prioritization may be useful for local governments from across the country to understand the broader context in which they are operating, Furthermore, state and federal actors may make use of this information to better understand how to support local governments in closing the urban-rural divide.

Survey Background

The research underlying this brief was built on data from a national random-sample of over 500 elected policymakers from local governments (i.e., township, municipality, and county governments) with a population of 1,000 or more. The survey was developed in collaboration with Dr. Christopher Poliquin of the University of California, Los Angeles and Young Hou of the University of Virginia, and was implemented by CivicPulse.

Below is the question wording for the survey item that was used:

Currently, how important is the issue of attracting new businesses to your community?

  • Much more important than other issues

  • Somewhat more important than other issues

  • About as important as other issues

  • Somewhat less important than other issues

  • Much less important than other issues


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