Impact of State Growth Management Laws on Economic Development

Abstract What is the impact of state growth management laws on state economic performance? Growth management regulation is likely to affect private production decisions of builders and developers in ways that might hinder state economic performance. This paper combines the political economy and institutional approaches. Systematic analysis is conducted using statewide and temporal data from 1980 to 1993. The results indicate that institutional arrangements matter in explaining state economic performance such as growth state product (GSP) and personal income. The argument holds for economic development legislation, but we found partial support for growth management laws. State growth management laws had adverse effects only on personal income. The interactive effect between growth management laws and institutional arrangement is not significant both for GSP and personal income. Introduction Population growth, traffic congestion, and urban sprawl resulted in activist growth management legislation over the last three decades. The primary purpose of state growth management laws is to reduce precarious and unplanned growth or urban sprawl through state institutionalization of growth management regulation. Growth management policy is best characterized as regulatory, because state and local governments use public policy to direct private behaviour (Feiock, 1994). However, the consequences of growth management are inherently distributive. Molotch (1976) depicted a city as an aggregate of competing land-based interests. Decisions regarding growth, at the local or any other level of government, are then decisions of who gets what, when, and how (Lasswell, 1936). These interests refer not only to competition for economic development but also for quality of life under the heading of growth management. Extensive research has been undertaken at the local level regarding the economic development impacts of growth controls, but there is a clear deficit of empirical studies at the state level (Feiock, 1994; Dowall, 1981). Growth management regulation is likely to affect private production decisions by builders and developers in ways that might hinder state economic performance. Extant evidence regarding the impact of state growth management legislation upon economic development has been primarily based upon case studies and it is less than systematic. Few comparative studies have addressed this issue and none has done so nation-wide (cross-state). This paper begins to fill this lacuna by developing a pooled analysis of the fifty American states over the 1980-1993 time periods. As a theoretical framework, we will employ a political economy approach of state regulatory costs of growth management laws and their effects on state economic development. The political economy approach is useful for inquiries about growth management and economic development in the context of local growth management actions (Feiock, 1994). However, we expand the political economy model to state growth management and state economy by incorporating state institutional arrangements. Brace (1993) convincingly argues that since the federal government shifted the public service burden to state and local government during the Reagan administration, state government policy exerted greater influences on state economies. In the context of environmental policy, Feiock and Stream (2001) contend that certain administrative arrangements and institutions for environmental regulation reduce regulatory uncertainty for business firms and thus "may enhance, rather than impede, economic development" (p. 313). Brace (1993) and Feiock and Stream (2001) suggest that without consideration of institutions or administrative arrangements, we lack full understanding of the outcomes of state policy regardless of growth management and/or environmental policy. A political economy approach to state growth management will be discussed in Section 2. …