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business persons (Basolo, 2000). Or, as suggested by H. J. Rubin (1988), the decisions of city eco- nomic development professionals may be systematically biased toward business interests even if these decisions are not explicitly intended to favor business. As a result, professionals may not per- ceive any direct influence from business.


The city limits story of unitary, economic self-interest by cities has persisted in research and the practice of local economic development. However, criticisms of public choice theory, the theoreti- cal basis of the city limits scenario, and the changing context of local economic development prac- tice provide an ongoing challenge to the public choice explanation of economic development policy in cities.

Our investigation was designed to determine the importance of the city limits story as well as the strength of political and needs factors as explanations for support of economic development. Using regression analyses on data collected from a national sample of U.S. cities, combined with U.S. Census sources, we investigated competing hypotheses thought to explain local economic devel- opment expenditures.

Our analyses provide little support for a public choice explanation of city economic develop- ment expenditures. However, a political variable—the preferences of elected officials—and an institutional variable—formal economic development planning—proved to be important factors influencing economic development expenditures. Both variables were associated with higher lev- els of spending. Population needs also were found to be an important factor explaining the level of economic development expenditures in cities. The results show that as needs increase, so does the level of economic development expenditures.

The results of this research have several implications for research and practice. First, it appears that the doubts about the continued, blanket application of the city limits story to local economic development policy making are reasonable. More attention needs to be focused on less determinis- tic influences such as political factors. Specifically, researchers need to consider the ways in which elected officials form their policy preferences and the influences on those preferences. Second, researchers and practitioners should closely examine the level of planning across cities and the impacts of planning on effort as well as outcomes. Many cities have population needs that should be the central concern of economic development policy. Ultimately, the importance of planning rests with effectively serving those needs.


1. All cities with missing expenditures data were dropped from the analysis, and an additional city was deleted due to an exceptionally high expenditure figure and its influence on the multivariate analyses.

2. Frequencies were computed in SAS using weighted data. Means and regression coefficients were computed using STATA to account for the sampling design.

  • 3.

    See Basolo and Lowery (2000) for a detailed discussion of competition measures. Draft paper available from authors.

  • 4.

    Three types of cities were identified: central, suburban, and nonmetropolitan. We recoded into dummy variables and

attempted to run the analysis with the nonmetropolitan and central dummies included in the model. The relatively few cases of nonmetropolitan cities in the sample resulted in problems with the models’ results. We chose to retain the 29 nonmetropolitan cities instead of reducing our sample even further. Therefore, we recoded the type of cities into central and other types.

5. The dichotomous variable for expenditures has limited variability. However, the model converged without difficulty and produced reasonable results.


Agranoff, R., & McGuire, M. (1998). The intergovernmental context of local economic development. State and Local Gov- ernment Review, 30(3), 150-165.


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