Alternative Strategies for Economic Development

Abstract

In recent years, pressures have mounted on local officials to develop policies that stimulate economic growth. The traditional approach, which calls for attracting manufacturing plants through the use of cost-cutting inducements, has been brought into question, and the search for alternative approaches led to a human capital strategy that focuses on attracting, retaining, and developing skilled labor. Empirical tests of two models, one representing human capital development and the other based on firm costs in the local economy, are described. The evidence suggests that a strategy focusing on human capital would have been more effective at stimulating per capita income growth than one designed to reduce firm costs.