Rethinking development and redistribution policy: Testing the local expenditure assumption using the Community Development Block Grant program

Abstract

Local governments make important public service decisions based on a critical assumption from urban political economy scholarship that development activities lead to economic growth, while redistributive activities do not. Using the Community Development Block Grant (CDBG) program, we test this local expenditure assumption by exploring the differential effectiveness of CDBG activities on individual and neighboring residential and commercial property values. To this end, we challenge the notion that development policies frequently improve economic returns while redistributive policies do not. We analyze the economic impact of 16 different CDBG activities on more than seven million properties between 2004 and 2017 in Dallas County, Texas. We find strong evidence that, contrary to conventional wisdom, redistributive policies can yield positive economic returns while development expenditures have mixed results. These findings have important implications for local governments seeking to grow their economy equitably.