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Learn what economic development is and why you may play a part in it every time you purchase something at the store.

Find out who sponsors economic development and some of the most common categories and examples of economic development.

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What Is Economic Development?

You most likely help fund economic development every time you purchase something at the store and pay local or state sales tax. That cup of coffee, those new shoes you bought, or the real estate taxes you may pay, all usually have a percentage of the sales going towards economic development projects or initiatives.In general, economic development is usually the focus of federal, state, and local governments to improve our standard of living through the creation of jobs, the support of innovation and new ideas, the creation of higher wealth, and the creation of an overall better quality of life. Economic development is often defined by others based on what it is trying to accomplish. Many times these objectives include building or improving infrastructure such as roads, bridges, etc.; improving our education system through new schools; enhancing our public safety through fire and police service; or incentivizing new businesses to open a location in a community.

Economic development often is categorized into the following three major areas:

  1. Governments working on big economic objectives such as creating jobs or growing an economy. These initiatives can be accomplished through written laws, industries’ regulations, and tax incentives or collections.
  2. Programs that provide infrastructure and services such as bigger highways, community parks, new school programs and facilities, public libraries or swimming pools, new hospitals, and crime prevention initiatives.

  3. Job creation and business retention through workforce development programs to help people get the needed skills and education they need. This also includes small business development programs that are geared to help entrepreneurs get financing or network with other small businesses.

How do we know if economic development is working? There are hundreds of ways to measure things for the hundreds of different economic development objectives that communities may have.

We can measure many of the above things through improvements in average income of families, local unemployment rates, standardized testing and literacy results in children, leisure time and changes in life expectancy, or hospital stays.

Examples of Economic Development

Tax Incentives for New Businesses

Your local community or state may provide incentives on lower real estate taxes or income tax rates for opening a new business that creates at least five jobs in the community. The lost revenue in taxes for the local government will most likely be made up by the generation of new jobs which creates more spending and sales for all the other businesses and enhances the prosperity of the community as a whole. These increased sales from other businesses result in more overall tax collection.

City Projects (Building a New Public School)

Fast growing communities that don’t have big enough high schools may propose small taxes to help fund an additional new school. The new high school should lead to better student-teacher ratios and overall better experience and education. This can lead to more people moving into the area because of good schools and ultimately more property taxes collected, which can further promote additional improvements such as updated text books, additional teachers, and new computers.

Affordable Housing Programs

Many cities and states have various initiatives that focus on creating affordable housing programs. These programs may help pay rent for lower income individuals, make it easier to get a loan locally to buy a home, or may offer incentives to home builders and developers that reduce the cost of building homes, therefore leading to lower purchase prices for citizens.

Lesson Summary

Let’s review. You could ask ten different people what economic development is and easily get ten different answers! In general, economic development is usually the focus of federal, state, and local governments to improve our standard of living through job creation and ultimately a better quality life. Economic development includes initiatives that improve infrastructure, enhance our education system, better our public safety, improve parks, and foster endless ways to incentivize and attract new businesses and jobs.

Economic Development Vocabulary ; Definitions

  • Economic Development: The focus of federal, state, and local governments to make improvements on the standard of living through job creation, innovative support, the creation of wealth, and overall creating a better quality of life.
  • Categories of Economic Development: Governments growing an economy, programs that provide services and infrastructure, job creation through workforce development programs

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