Federal loans to private enterprise under the Economic Development Act of 1965.

by Ira S. Lowry

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Procedures for evaluating project proposals submitted to the Economic Development Agency (EDA) in terms of their effects on other enterprises and on other communities. An analysis of the market conditions under which eligible firms can be assisted reveals that the net redistribution of employment in favor of the redevelopment area will be minimal if the principal competitors of the EDA-assisted enterprise are located in the same area. Negative impacts are less likely to focus on one or a few communities if producers in this market are geographically dispersed and if the market demand for the product is expanding. Markets characterized by excess capacity are not generally attractive for new firms unless they have a significant cost-advantage over their predecessors. Applicants for EDA assistance will seldom be in this position. A quantitative analysis of the possible impacts of EDA-assisted ventures on the sales and employment of competing firms and of the communities where these firms are located is presented. It is recommended that EDA invest heavily in market research on behalf of applicants for federal assistance to enterprises in redevelopment areas.

This report is part of the RAND Corporation Research memorandum series. The Research Memorandum was a product of the RAND Corporation from 1948 to 1973 that represented working papers meant to report current results of RAND research to appropriate audiences.

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