Planning for prosperity: Analyzing the effectiveness of local economic planning

Economic development planning is meant to provide a roadmap to guide policymakers toward greater economic well-being and quality of life in a region. This report explores the effectiveness of planners in achieving these objectives. To do this, we use natural language processing to characterize the text of several hundred economic development plans and ask two primary questions. First, we ask whether planners are backward-looking—primarily documenting the recent growth experience in a region—or are forward-looking—going beyond this and identifying and creating the conditions for future growth opportunities. Second, we compare the economic development plans in key dimensions and relate these differences to differences in local economic growth rates.

Our findings reveal that planning documents serve a dual purpose, on average providing an accurate description of the recent composition of growth in a region while also anticipating the composition of future growth and, possibly, laying a foundation that leads to faster growth. In addition, we find that more detailed and quantitative planning correlates with faster growth. These results hold even when accounting for local income, population density, and document length. At the same time, a focus on equitable growth during the planning process is not associated with a decline in income inequality.

These facts suggest that federal and state policymakers should continue to support the regional planning process, especially for regions (like U.S. Economic Development Districts (EDDs)) that host distressed communities. Currently, the U.S. Economic Development Agency (EDA) provides funding and hosts resources for economic development professionals to use when developing regional plans. As of now, these resources do not describe the features of economic development plans that lead to greater economic success in a region, mainly because research on this topic is scarce. This report should begin a process of uncovering these features of effective planning in order to guide economic development professionals toward more effective planning strategies.

Download the full report here.