The Distribution of Federal Economic Development Grant Funds: A Consideration of Need and the Urban/Rural Divide

This article seeks to determine the effect of rurality and need on per capita federal grant receipts in local areas over time, controlling for local and regional government capacities. In other words, are rural places treated differently than urban places in federal grant distributions? Kentucky is used as the case state, with 120 county areas considered over an I I -year period from 1993 to 2003. Factor analysis is used to explore the underlying capacity constructs, and a pooled cross-sectional analysis reveals differential effects of grant receipts per person according to a county's position on the rural-urban continuum (aka Beale code) and need-based indicators. Whereas rurality significantly increases grant funding per capita, need has the opposite effect.rural development; government capacity; fiscal federalism; federal grants; performance