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Most evaluations conclude that state and local business financing efforts to sdmulate <br />economic development in distressed areas outside big cities have little influence on either the <br />level or th►: distribudon of economic growth. The studies show that programs without <br />s ific geographic targets are used disproportionately by businesses in grov;�ng areas of a <br />P� <br />state rather than in distressed areas, but have no measura.ble effects on the growth of the <br />� <br />state economy. Programs aimed at specific distressed geographic areas show almost no <br />. ; <br />effects on the growth of these areas.' <br />The evaluations leave ec:onomic development planners and policy makers without <br />insight about why programs have no effects or what they should do to make programs more <br />successful in encouraging growth in distressed areas--the programs' explicit aim. <br />Where the � <br />. <br />evaluadons do offer policy dir�don, the recommendations reflect primarily the framework of <br />neoclassical economic theory. BeGause these programs seek to influence economic activity, <br />such recommendadons are useful. However, programs that sta.te and local government <br />officials implement are political as well as economic, and programmatic changes that are <br />likely to have the most effects on program outcomes must emerge from understanding ihe <br />political economy of �rograms, not just their economics. <br />This paper draws on a study of a�n economic develvpment program, Minnesota's <br />Small Cities Economic Develt,prr►�i�t Progtam, to assess thrze gussiLle �xplanations f�r the <br />poor results of state and local programs to stinnulate the economies of distr�ssed ar�s. 5ta�te <br />`M�rgaret E: llewar, "'!'ax incCnrives aad Pd�lic Loans and Subsidies: W�i I�i�crenrx Dc�'1'hay I�iaic� in <br />Hill, and Sammis B. 'Whiie, <br />Nonmetropolitan Economic Development?" in Richard D. �iingham+ �:d�'�'� �• . <br />eds,� Financine Eronomic Develonment (Newburg� Paric, CA: Sage, 1990y. Exc,cptions oxist when ti�� at� <br />designated as distres.sed is so smeli rhat a program caa influeace a deCision to locate or expand on one ssdo of a <br />border rather thaa another �ad therefore caa produce �. eff�t on the distres.�od strea. <br />