Should-Read: Dylan Matthews: Larry Summers on the Midwest and South: the case for a government bailout of the heartland

Should-Read: Dylan Matthews: Larry Summers on the Midwest and South: the case for a government bailout of the heartland: “In 2016, only 5 percent of men ages 25 to 54 in Alexandria, Virginia (a rich DC suburb), were not working…

…In Flint, Michigan, the share was 51 percent. That staggering fact frames a new paper by three Harvard economists—Benjamin Austin, Ed Glaeser, and former Treasury secretary/chief Obama economic adviser Larry Summers…. it’s notable that Glaeser and Summers are now embracing an active government role in revitalizing struggling parts of the country, and trying to work through the best way to do it.

While the idea that Youngstown, Ohio, needs more help than San Francisco might seem intuitive to a non-economist, the economic case for policies targeting certain areas, rather than certain kinds of individuals, is somewhat shakier…. Most variation in incomes is within regions, not between them…. Why implement policies to boost specific geographic areas when you could just direct money to poor individuals instead?… Austin, Glaeser, and Summers argue that place-based policies are necessary because different regions respond to various public policies differently…. The authors roughly estimate how responsive workers in different areas are to employment subsidies that boost their wages by estimating how employment changes in different areas as wages rise and fall. Sure enough, they find that West Virginians are more than three times as sensitive to changes in the rewards to work as Wyoming residents are. That is: Employment subsidies targeted at struggling states like West Virginia are likely to be considerably more effective than subsidies to better-off states like Wyoming…