Local Economic Development: In the Pursuit of Public Interest or Public Choice?

Communities face a fundamental choice in how they evaluate any potential benefits accruing from economic development. This paper develops a decision-making framework using two approaches borrowed from the public welfare and public finance literature. The Public Interest approach illustrates how a community may incorporate distributional equity concerns into its evaluation process, while the Public Choice approach takes an explicitly government as separate economic agent perspective when evaluating economic development. The distinction between these two approaches is illustrated using the results of city-level CGE model.