Effectiveness of Economic Development Programs

Testifying on the results of its analysis of the effectiveness of economic development programs, GAO stated that it had reached two general conclusions about the historical performance of Federal economic development programs. First, after accounting for the many factors that influence employment growth, these programs did create jobs in the 1970's; however, whether this occurred at the expense of jobs that might have been created with an alternative use of funds is unknown. Second, the number of jobs created varied, depending upon the form of the aid. Job creation effects also varied by industry and by the employment growth characteristics of an area. GAO found that: grants created relatively more jobs than loan guarantees and loan guarantees more than direct loans; regardless of the method used to provide aid, most jobs were created in the manufacturing sector of the economy; grants were most effective in creating jobs in States with low employment growth; and among the various grant categories, public works grants were the most effective in creating jobs.