Local Economic Development, Agglomeration Economies and the Big Push: 100 Years of Evidence from the TVA” Working Paper 2011

We study the long run effects of one of the most ambitious place based economic development policies in U.S. history: the Tennessee Valley Author-ity (TVA). Using a rich panel dataset of counties, we conduct an evaluation of the dynamic effects of the TVA on local economies in the seventy years following the program’s inception. We find that the TVA led to short run gains in agricul-tural employment that were eventually reversed, while impacts on manufacturing employment continued to intensify well after the program’s subsidies had lapsed – a pattern consistent with the presence of agglomeration economies in the manu-facturing sector. Economists have long cautioned that the local gains created by place based policies may be offset by losses elsewhere, yielding ambiguous effects on the U.S. as a whole. We develop a novel approach to assessing the aggregate consequences of place based policies. Our findings suggest that the TVA boosted national manufacturing productivity by roughly 0.3 % and that the dollar value of these productivity gains exceeded the program’s costs