Estimated Employment Effects of Federal Economic Development Programs

In response to a congressional request, GAO developed an econometric model to provide consistent estimates of the employment effects of GAO-surveyed economic development programs.

Based on estimates from this model, GAO concluded that the programs did create jobs during the 1974-78 period. The number of jobs created varied by industrial classification and by each state's overall level of employment growth. Several economic development programs funded projects that directly employed construction workers. However, the construction industry experienced low growth during the 1974-78 period, and construction projects financed by these programs tended to be capital- rather than labor-intensive. GAO found that most jobs were created in the manufacturing sector of the economy, regardless of whether aid was provided in the form of grants, direct loans, or loan guarantees. Among the various grant categories, public works grants were the most effective in creating jobs. GAO also found that grants were most effective in creating jobs in states with low employment growth.