Economic History

Performance of federal public agency for economic development: the Economic Development Administration (EDA) 1965-2010.

The eternal and controversial role of the state in fostering and bolstering economic development has been advanced -substantially and theoretically- since the second half of the twenty century. The administration of JFK – encouraged by some scholars- marks the beginning of a series of agencies devoted to tackle poverty. Amid Cold War (1961), the federal state of the United States established what could be seen as the first American Agency for economic development: USAID. Four years later in 1965, The Economic Development Administration (EDA) was institutionalized under the Public Works and Economic Development Act. The latter is the agency we will focus in by reviewing agency’s related literature. In that regard, this literature review found that the discussion about the agency has focused mainly on its expected outcomes and in its needed reforms. Only few works have been dedicated to analyze aspects of the management within EDA. 
Thus, the following balance presents a critical approach to what some scholars have said about the EDA so far. Despite the fact that the academic field of both economic development and public management are enormous, the search was narrowed mainly by geography (U.S.), agency (EDA), and period of time (1965-2010). We focus on accredited journals and specialized articles. Edited books, web sites and visual sources among other formats were omitted from this work.  Furthermore, this literature Review has its main limit basically on theoretical issues about the state’s mission in intervening the economy. We assume that EDA itself belongs to a specific theoretical framework that has ground on Economic Development Theories (Rostow, 1962; Hirshman, 1958; Rosenstein-Rodan, 1961).   
Therefore, if we exclude the theoretical framework of economic developmental issues, we can identify three categories of academic production. First, the most prolific debate over EDA is about its impacts and economic outcomes. Traditionally, that sort of analysis are intended to bolster ideological position on the role that public agencies should pursue in order to foster economic development. Therefore, most of them are not empirical research with exhaustive data-supported conclusions. A second less developed area of study is the performance of EDA itself: the structure of the agency –its institutional arrangements, its bureaucracy and its culture, have not been tackled intensively. Few authors have specialized on EDA examination. Third, by looking at EDA’s performance and outcomes -from almost an ideological perspective- its critics have furthered a debate over a set of reforms that EDA needs. Likewise we present our result in the same order: first section of this literature review is this introduction; the second section shows what experts have said about EDA outcomes and Impacts; the third section considers EDA’s performance related literature; and the fourth looks at the proposed reforms debate. Finally we present our conclusions. 
Impacts and Outcomes:
Regardless the theories of either public management or economic growth, the administration of the economic development requires the measurement of its goals and expectations in terms of objective metrics for unemployment rates, capital growth and poverty alleviation. Scholars have focused in looking for impacts mainly in labor rates. Two works depicted EDA’s employment effect during two major time periods, first assessment cover the first period from the EDA’s creation to 1975 (Borrows & Browley). The second assessment covers until 1999 (Haughwout, 1999). Despite that absence, works have conclude that, with relative solid empirical evidence, the impact of EDA’s programs on unemployment rate have been positive so far. The conclusion for the agency’s first decade of works is that its programs have not been successful in fostering employment mainly in large metropolitan areas, while it did have a different outcome on rural areas (Barrow & Browley, 1975). In authors word,  “the empirical analysis in this study indicates that EDA investments in large urban center or regions did not produce employment impacts as large large as projects located in less densely populated areas” (Barrows & Bromley, 1975). 
Besides  Barrows and Bromley, Haughwout’s later analysis on labor states that positive improvements have been made by the agency, in spite of one programs externality: the improvements on labor market  were advanced at expenses of surrounded areas where the projects took place and EDA’s investments  had not significant effect on employee compensation (Haughwout, 1999). Considering the methodology, these two works used multiple regression. Particularly, Barrows and Bromley used county population, non-agriculture employment rate, average household income, among other proxis. Finally, it is important to note that no similar works, for the most recent Agency historical period (from 2000 to nowadays), have been published yet.               
An other metric for measuring EAD’s real impact on economic development is change in personal income rate, which is a proxy for gauging economic growth. This is a metric that helps understand why state intervention is important for alleviating poverty and leveling people over the poverty line. Martin and Graham in a paper published in 1980 provided some evidence of  EDA’s programs “on the aggregate economic growth of recipient areas” (Martin & Graham, 1980. P. 52). They take Personal Income as a proxy, and by comparing aided-counties to non-aided-counties, they conclude that “EDA-assisted counties experienced significant improvements in relative personal income growth rates during the period of aid receipt” (Martin & Graham, 1980. P. 6).
Finally, there are some publications that mostly look like propaganda (Burchel, 1997; EDA, 1974; EDA Annual report 2000)). It is hardly to define them as strictly scholar production. However, within those publications it is possible to find not only some interesting facts, but also interesting scholars. The work led by Burchel in 1997 is a good example of that. It was developed by six universities and academic institutions: Rutgers University, Columbia University, Princeton University and University of Cincinnati among others. Despite the fact that it could have been a paid non-independent study, authors conclude that most of the EDA’s projects were achieved as follow: 99% were completed as planned; 91% were completed on time; and 52% were completed under the budget estimations (Burchel, 1997). Somehow they made an approach to measure the performance of the agency throughout its outcomes, which is our the next issue.

EDA’s Performance: 

Within the literature we accessed, there are no works that assess Management Performance considering goals, objectives and expectation versus Outcomes and Impacts. In fact, Agency’s Outcomes and Impacts are analyzed, by independent scholars, regardless the stated objectives of the Agency. Nonetheless, there is a relative consistent effort to follow the Agency historical evolution. Penn State University Professor Amy Glasmeier has recently devoted research resources in studying the expenditure patters of the agency (Glasmeier & Wood, 2005) and its likely overhauling (Glasmeier & Markusen, 2008). It is important that Glasmeier’s works focus mainly in poverty reduction, and within that effort she has tackled EDA’s performance. 
The first analysis she wrote about the agency was about its expenditure patters over EDA’s history. There, along with Lawrence E. Wood, she described the historical background of the Agency stating that since 1930 the American state started to build such a kind of public agencies due to “a fear of the political implications of the failure of market-led models of development…” (Glasmeier & Wood, 2005. P. 1262). They note that the greatest pitfall that the Agency has fall in is policy intervention. As James Wilson would describe it (Wilson, 1989. Chapter 13), Congress ask the agency not only to do things without allocation of enough resources, but also increase EAD’s responsibilities over time (Glasmeier & Wood, 2005). For instance in 1969 Congress‘ mandate to the Agency was to cover urban areas as well as rural, broadening the eligibility of potential recipients; In early 1970’s Congress required the agency to provide technical assistance to firms that had been affected by free trade; even the Congress has charged responsibilities on libraries, drug rehabilitation and other programs such as “defense adjustment assistance to areas that had recently experienced military base closures” (Glasmeier & Wood, 2005). Authors argue that all these added responsibilities have been done in the context of dramatic financial cuts and adjustments.    
The other important work by Glasmeier was co-authored with Ann Markusen. There authors tackle one of the principal critics scholars have made to the agency: It has focused excessively on infrastructure and housing projects. In author’s words: “Across these three agency programs, the bulk of funds have been spent providing basic infrastructure and housing (Glasmeier & Markusen, 2008. P. 84), and also “over the years, water and sewer provision has comprised between 25% and 75% of program expenditure” in EDA programs (Glasmeier & Markusen, 2008. P. 85). They also note that “EDA is largely viewed as rural economic development agency because many older cities and deteriorating suburbs have had difficulty acceding EDA’s development and infrastructure programs” (Glasmeier & Markusen, 2008. P. 88). From there, they acknowledge that EDA should devote efforts to improve human capital. By doing so, they identify EDA’s limitation to deal with such challenge since it lacks the required expertise to work with other agencies that deal with educational issues. Therefore, coordinating with other agencies, redefining the policy itself, and defining its constituency base are part of the reforms the agency needs in order to be understood and judged it performance in a fair way. 

Reforms:

Less rigorous analyzes have been written on EDA’s needs for reform. Mark Drabensttot and Jeffrey Finkle -at best- might be the most bitter critics of EDA’s policy. Both have works that barely look at empirical evidence. Drabensttot’s work on EDA focuses more in policy recommendation than in empirical evidence to support his perspective and critics. So does Finkle in a short essay of barely four pages. 
In a  publication of the Federal Reserve Bank of Kansas, entitled “Rethinking Federal Policy for Regional Economic Development” (2006), Drabensttot basically explain the reason why EDA is lagging behind the economic progress. Generally speaking, he states that EDA’s policy must adapt to post-industrialism economies‘ needs. He -whom was at the time Director of the Center for the Study of Rural America at the Federal Bank Reserve in Kansas City- has led the argument for a reshaping in EDA policy, basically by stating that “the problem is quite simple: most of the federal programs for economic development were written for the economy of the 20th century, not for the 21st century”(Drabensttot, 2006. P. 115). As well as Glasmeier and Markusen noted, Drabensttot acknowledge that EDA has had a heavily emphasis on infrastructure, housing and airports. Likewise, Drabensttot’s proposal consists in having a comprehensive regional strategy, regional governance improvement program, bolstering regional innovation initiatives and entrepreneurship (Drabensttot, 2008). Beside that, Jeffrey Finkle -who is CEO of the International Economic Development Council- has agreed with Glasmeier, Markusen and Drabensttot that “for successful consolidation of these programs to occur, each program must undergo a review and performance evaluation, coordinate across departmental lines, and place more emphasis on human capital” (Finkle, 2008. P. 112) 
   

Conclusions: 

Generally speaking, EDA is seen as a small non-important agency within the economic establishment. That might be the reason why the reviewed bibliography is neither developed with strong arguments nor with passion and exhaustiveness. Certainly, economic policy focuses on monetary issues and public budget allocation, but scholars should devote more resources and efforts in looking at major projects the Agency has. Considering the current economic recession, future researches should look closer at how EDA has worked out and helped the US economy to move forward during the last economic downturn. Definitively, more researches are needed in order to clarify the role of public management in pursuing the economic recovery. In that sense, having a comprehensive understanding of the agency and the role it should perform during economic crisis will contribute not only to the debate over policies but also over the nature of the public sector itself. 
Specific conclusions: 
  1. Analysis on economic impact and agency outcomes are not updated. The last analysis we had access to was published by 1997 which leaves a hole of more than a decade without serious and data-driven discussion. In that regard, poverty alleviation theories should also frame future researches, complementing with Personal Income and economic Growth perspectives. That would help the Agency’s ability to reshape its policy. 
  2. Management Performance Analysis must match goals and objectives previously set and the outcome and the impact obtained. The actual knowledge we have on this regard is dysfunctional, basically because economic growth depends not only on the Agency’s work or policy. That is the reason why it is important to limit Agency’s scope while judging its performance. 
  3. Although it might be an issue of ideology, debate on EDA reforms require more empirical evidence demonstration. Data-based discussion would help improve not only the debate, but also the policies the Agency needs.           
Bibliography: 
  1. Glasmeier, Amy and Ann Markusen (2008). Overhauling and Revitalizing Federal Economic Development Programs. Economic Development Quarterly, May; vol. 22, 2: pp. 83-91.
  2. Barrows, R. L., & Bromley, D. W. (1975). Employment Impacts of the Economic Development Administration’s Public Works Program. American Journal of Agricultural Economics, 57(1), 46-54. Retrieved from EBSCOhost.
  3. Glasmeier, A., & Wood, L. (2005). Analysis of US Economic Development Administration Expenditure Patterns over 30 Years. Regional Studies, 39(9), 1261-1274. Retrieved from EBSCOhost.
  4. Haughwout, A. F. (1999). New Estimates of the Impact of EDA Public Works Program Investments on County Labor Markets. Economic Development Quarterly, 13(4), 371-382. Retrieved from EBSCOhost.
  5. Finkle Jeffrey A. (2008). A Cautious Look Into Reconfiguring Federal Economic Development Programs.  Economic Development Quarterly, May; vol. 22, 2: pp. 112-114.
  6. Drabenstott, Mark (2008). An Effective Overhaul of Federal Economic Development Policy: Response to Markusen and Glasmeier. Economic Development Quarterly, May; vol. 22, 2: pp. 92-98.
  7. Drabensttot, Mark. (2006) Rethinking federal policy for regional economic development. http://geography.tamu.edu/class/bednarz/feddevpol.pdf 
  8. Martin, R. C., & Graham, R. r. (1980). The Impact of Economic Development Administration Programs: Some Empirical Evidence. Review of Economics and Statistics, 62(1), 52-62. 
  9. Burchel R. (1997) Public Works program: Performance Evaluation. Economic Development Administration, Washington. http://www.eda.gov/ImageCache/EDAPublic/documents/pdfdocs/1g3_5f19_5fpweval_2epdf/v1/1g3_5f19_5fpweval.pdf 
  10. Rostow, Walt Whitman (1962), “The Stages of Economic Growth” London: Cambridge University Press.
  11. Hirshman. Albert. (1958). The Strategy of Economic Development. New Haven, Conn.: Yale University Press. 
  12. Rosenstein-Rodan, Paul. (1961)Notes on the Theory of the Big Push”, in Ellis, editor, Economic Development for Latin America (1961).

Categories: Economic History

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