Government efforts to attract businesses using tax incentives and other subsidies are nothing new in the United States. Matthew Freedman writes about Mississippi's "Balance Agriculture with Industry" Program, which endeavored to attract manufacturing operations to the state using taxpayer dollars in the 1930s. Mississippi's program shares features with many modern-day economic development initiatives, though its short- and long-run impacts on ..

Freedman, Matthew

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America’s	earliest	economic	development	initiativesprovide	perspective	on	recent	battles	over	jobs.Government	efforts	to	attract	businesses	using	tax	incentives	and	other	subsidies	are	nothing	newin	the	United	States.	Matthew	Freedman	writes	about	Mississippi’s	“Balance	Agriculture	withIndustry”	Program,	which	endeavored	to	attract	manufacturing	operations	to	the	state	usingtaxpayer	dollars	in	the	1930s.	Mississippi’s	program	shares	features	with	many	modern-dayeconomic	development	initiatives,	though	its	short-	and	long-run	impacts	on	local	economies	maybe	most	relevant	today	for	developing	countries	that	have	more	recently	embarked	on	efforts	todiversify	and	modernize	rural	areas.			The	bidding	war	that	recently	erupted	among	North	American	cities	to	lure	Amazon’s	second	headquarterscontinues	a	long	tradition	of	governments	competing	over	jobs	using	tax	and	other	incentives.	Indeed,	publicofficials	in	the	United	States	have	long	tried	to	encourage	local	economic	development	through	a	variety	of	place-and	project-based	interventions.	Research	on	such	efforts	has	generally	focused	on	policies	instituted	within	thepast	few	decades.	However,	the	history	of	such	initiatives	in	the	United	States	stretches	back	much	further.America’s	early	forays	in	using	industrial	policy	to	attract	businesses	to	particular	regions	in	the	1930s	offers	awindow	into	the	genesis	of	our	current	development	policy	landscape	and	provides	some	perspective	on	thesepolicies’	potential	long-run	impacts	on	communities.Motivated	by	a	desire	to	bolster	its	flagging	economy,	the	state	of	Mississippi	embarked	upon	an	unprecedentedeffort	in	the	late	1930s	to	attract	manufacturing	interests	to	its	historically	agricultural	communities.	Passed	in1936,	Mississippi’s	Balance	Agriculture	with	Industry	(BAWI)	Program	allowed	cities	and	counties	to	use	moneyraised	through	publicly	issued	bonds	to	purchase	land,	build	manufacturing	facilities,	and	rent	those	facilities	outat	low	cost	to	private	companies.	The	BAWI	Program	was	the	first	systematic	state-sponsored	program	aimedexplicitly	at	attracting	businesses	using	government	subsidies;	in	subsequent	years	it	provided	a	model	for	otherstates	hoping	to	diversify	and	strengthen	their	economies.	It	also	set	the	stage	for	increasingly	intense	inter-statecompetition	over	industry	in	the	post-World	War	II	period.Enticed	by	the	benefits	offered	under	the	BAWI	Program,	thirteen	large	manufacturing	plants	took	root	inMississippi	between	1936	and	1940.	Despite	efforts	to	attract	firms	that	offered	higher	paying	jobs	and	that	wouldemploy	men,	the	plants	that	established	operations	in	the	state	were	predominantly	in	low-skilled	textile	industriesand	primarily	hired	women.	Figure	1	is	a	photograph	taken	in	1942	of	the	employees	of	Crystal	Springs	ShirtCorporation,	a	BAWI	plant	staffed	almost	entirely	by	women	that	located	in	southwestern	Mississippi.	Figure	1	–	Employees	of	Crystal	Springs	Shirt	Corporation,	1942USApp – American Politics and Policy Blog: America’s earliest economic development initiatives provide perspective on recent battles over jobs. Page 1 of 4		Date originally posted: 2017-10-24Permalink: http://blogs.lse.ac.uk/usappblog/2017/10/24/americas-earliest-economic-development-initiatives-provide-perspective-on-recent-battles-over-jobs/Blog homepage: http://blogs.lse.ac.uk/usappblog/From	Employees	at	Crystal	Springs	Shirt	Corporation	plant,	1942.	Sysid101018.	Scanned	as	tiff	in	2009/12/16	by	MDAH.	Credit:	Courtesy	ofthe	Mississippi	Department	of	Archives	and	HistoryNotes:	Archived	at	the	Mississippi	Department	of	Archives	and	History.	Photographer:	Luther	M.	Hamilton,	Sr.	Location:Crystal	Springs,	Copiah	County,	Mississippi.My	research	examined	how	the	arrival	of	BAWI	plants	impacted	local	economies	both	contemporaneously	andover	the	long-run.	I	focused	particularly	on	the	BAWI	plants’	effects	on	the	labor	market	outcomes	of	women,	whopreviously	had	few	opportunities	to	work	off	home	farms	in	affected	areas.USApp – American Politics and Policy Blog: America’s earliest economic development initiatives provide perspective on recent battles over jobs. Page 2 of 4		Date originally posted: 2017-10-24Permalink: http://blogs.lse.ac.uk/usappblog/2017/10/24/americas-earliest-economic-development-initiatives-provide-perspective-on-recent-battles-over-jobs/Blog homepage: http://blogs.lse.ac.uk/usappblog/To	explore	these	impacts,	I	compiled	nearly	a	century’s	worth	of	Census	data	and	tracked	demographic	andeconomic	conditions	in	Mississippi	counties	that	did	and	did	not	receive	BAWI	plants.	The	main	results	aresummarized	in	Figure	2,	which	shows	female	and	male	labor	force	participation	in	the	eleven	“treated”	countiesthat	received	the	thirteen	plants	as	well	as	in	the	seventy-one	other	“control”	counties	between	1920	and	2010.The	shaded	region	corresponds	to	the	four-year	span	during	which	the	BAWI	plants	initially	establishedoperations.Figure	2	–	Female	and	Male	Labor	Force	Participation	Rates	in	Mississippi,	1920-2010Notes:	Derived	from	Decennial	Census	and	American	Community	Survey	data.	The	treated	counties	are	the	11	Mississippicounties	that	received	BAWI	investment	between	1936	and	1940.	The	control	counties	are	the	71	Mississippi	counties	that	didnot	receive	BAWI	investment.As	the	figure	shows,	female	labor	force	participation	rates	in	counties	that	received	BAWI	plants	rose	slightly	afterthe	investment	took	place,	whereas	they	fell	sharply	elsewhere	in	Mississippi.	Relative	to	the	average	gap	pre-BAWI,	the	gap	in	female	labor	force	participation	rates	that	opens	up	between	treated	and	control	counties	in1940	is	five	percentage	points,	corresponding	to	an	18	percent	increase	in	participation	rates.	Even	more	notably,the	gap	persists	decades	into	the	future,	narrowing	very	slowly	and	disappearing	entirely	only	after	2000.	Thispattern	is	particularly	notable	given	that	the	majority	of	original	BAWI	plants	were	no	longer	operating	by	the	early1960s.	Meanwhile,	male	labor	force	participation	rates	in	treated	and	control	counties	follow	very	similar	trendsboth	pre-	and	post-BAWI	investments,	consistent	with	most	of	the	subsidized	plants	hiring	primarily	women.There	are	several	possible	mechanisms	behind	the	observed	persistent	impacts	of	the	BAWI	plants	on	laborforce	participation	among	women.	One	possibility	is	that	the	BAWI	plants	attracted	other	upstream	anddownstream	companies	or	led	to	spinoffs	that	also	employed	many	women.	I	found	that	this	type	ofagglomeration	effect	can	explain	some,	but	not	all	of	the	persistent	effects.	Selective	migration	of	women,meanwhile,	appears	to	play	little	role	in	the	initial	or	lingering	impacts	of	the	investment.Another	plausible	explanation	for	the	program’s	persistent	impacts	on	local	labor	markets,	albeit	one	for	whichthere	is	limited	hard	evidence,	is	that	the	employment	opportunities	afforded	by	BAWI	plants	influenced	localattitudes	about	women	and	work,	and	that	these	attitudes	were	imprinted	on	subsequent	generations.	In	othersettings,	researchers	have	found	that	such	intergenerational	transfers	of	norms	and	expectations	regarding	theacceptability	and	desirability	of	women’s	employment	have	quantitatively	important	and	long-lasting	impacts	onlabor	markets.USApp – American Politics and Policy Blog: America’s earliest economic development initiatives provide perspective on recent battles over jobs. Page 3 of 4		Date originally posted: 2017-10-24Permalink: http://blogs.lse.ac.uk/usappblog/2017/10/24/americas-earliest-economic-development-initiatives-provide-perspective-on-recent-battles-over-jobs/Blog homepage: http://blogs.lse.ac.uk/usappblog/This	research	offers	some	perspective	on	the	short-	and	long-run	consequences	of	one	of	America’s	earliestcoordinated	efforts	to	use	industrial	policy	to	strengthen	local	economies.	Modern-day	government	efforts	to	lurejobs	to	specific	cities	or	regions	share	many	features	of	Mississippi’s	early	attempts.	However,	my	results	arearguably	more	relevant	in	the	present	for	developing	countries,	whose	governments	have	more	recently	adoptedindustrial	policies	aimed	at	diversifying	and	modernizing	the	economies	of	traditionally	agricultural	areas.This	article	is	based	on	the	paper,	‘Persistence	in	industrial	policy	impacts:	Evidence	from	Depression-eraMississippi’,	in	the	Journal	of	Urban	Economics.Featured	image:	Courtesy,	Mississippi	Department	of	Archives	and	HistoryPlease	read	our	comments	policy	before	commenting.Note:		This	article	gives	the	views	of	the	author,	and	not	the	position	of	USAPP	–	American	Politics	and	Policy,nor	of	the	London	School	of	Economics.	Shortened	URL	for	this	post:	http://bit.ly/2y3xTVB_________________________________________	About	the	author	Matthew	Freedman	–	University	of	California,	IrvineMatthew	Freedman	is	an	Associate	Professor	in	the	Department	of	Economics	at	the	University	ofCalifornia,	Irvine.	His	primary	research	interests	are	in	labor	economics,	public	finance,	and	urbaneconomics.	His	work	has	also	addressed	topics	in	environmental	economics	and	the	economics	ofcrime.	He	received	his	Ph.D.	in	economics	from	the	University	of	Maryland-College	Park.USApp – American Politics and Policy Blog: America’s earliest economic development initiatives provide perspective on recent battles over jobs. Page 4 of 4		Date originally posted: 2017-10-24Permalink: http://blogs.lse.ac.uk/usappblog/2017/10/24/americas-earliest-economic-development-initiatives-provide-perspective-on-recent-battles-over-jobs/Blog homepage: http://blogs.lse.ac.uk/usappblog/

America's earliest economic development initiatives provide perspective on recent battles over jobs.

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