Economic Development

Pursuant to a congressional request, GAO reviewed the Economic Development Administration's (EDA) May 1998 report on its public works program, which created jobs in economically distressed communities, focusing on whether: (1) the report's results would be similar if additional variables that directly took into account the prior level of a county's employment or population were included in the analyses; (2) the report's job creation estimates include only new jobs or jobs relocated from another area; and (3) other technical issues might affect the reliability of the cost estimates presented.

GAO noted that: (1) GAO does not believe that the conclusion in the EDA report about the linkage between its public works program and increases in permanent private-sector jobs is warranted; (2) GAO's analyses produced different results from the EDA study; (3) when GAO included each county's level of employment prior to the EDA grant in its regression analyses, it found that prior employment levels had a significant effect on counties' post-grant employment levels, and EDA grants no longer had a significant effect; (4) by not taking into account the counties' previous employment levels, the study may have shown only that larger counties--with high levels of employment--tend to receive the most grants; (5) in addition, the job creation estimates did not address whether the jobs are new or relocated from another area, but only that counties receiving EDA grants have more jobs than counties not receiving grants; and (6) GAO also identified some technical issues pertaining to the certainty of the cost estimate per job created.