Four tests to ensure real economic development impacts
To have an impact, public sector economic development initiatives must pass four tests.
Will government action truly spur development and growth, or will the development and growth occur anyway, without government involvement? Too often public dollars underwrite economic activity that would have taken place without any government action.
Does the positive impact from economic development spending exceed the benefits that would have resulted from alternative uses for those funds? State funds for economic development cannot be used for other purposes – public investment in education, for example, or private sector purchases that taxpayers might have made with the money they paid to fund economic development."
Does the impact of government economic development activity sum to greater than zero for the state? The positive impact on one area may come at the expense of another, as in the case, for example, of a firm simply relocating its production facilities from one site to the next.
Do the overall benefits of the government economic development activity exceed its costs? Benefits must be weighed against the costs in order to assess whether or not economic development efforts yield true gains.