The US Economic Development Administration (EDA) invests in economic development projects throughout the country to promote innovation, competitiveness, and economic growth. This brief summarizes the local impacts of EDA’s construction projects on private investment at both the census tract and county levels.

What We Found

We find that by three years after an EDA grant, EDA construction projects are associated with an increase in commercial sales at the tract level and with several positive effects on sales and lending at the county level, particularly for counties with larger employment bases. These patterns suggest that EDA construction projects can catalyze broader market confidence and investment beyond the project footprint.

At the census tract level, we find no relationship between EDA construction investments and the number of commercial real estate sales, sales volume, or loan volume.

At the county level we find the following:

• EDA construction projects are associated with an increase in commercial property sales. We estimate that counties with EDA construction projects saw an additional 7 to 54 sales per $1 million of investment and 88 to 328 sales per EDA grant each year. The event study analysis suggests that EDA construction investments are associated with stemming and possibly reversing a decline in commercial real estate sales. This suggests that EDA projects may lead to new business activity and flows of capital that offset declines in regions facing economic headwinds.
• Counties with construction projects saw an estimated $66 million to $731 million in additional commercial sales per EDA grant. However, we did not detect an increase in sales volume per dollar of investment.
• Looking at the relationship between EDA construction projects and commercial real estate lending volume, we estimate an additional $43 million to $307 million in annual loan volume per $1 million in investment and an additional $577 million to $1,762 million in loan volume per EDA grant. We interpret this as indicative of increased capital flows into the county, setting the stage for future economic growth.

Within county subgroups, we find the following:

• Estimated effects differ with county characteristics. The relationships between EDA construction projects and commercial investment in larger counties appear very similar to the relationships that we estimated using all counties. However, we do not find any statistically significant effects on commercial investment in counties with smaller workforces.
• Estimated effects appear to differ by project type. Commercial real estate investment in counties with facilities and transportation projects appears to be driving the county-level findings.

How We Did It

To measure financing and investment, we collected transaction-level commercial sales and mortgage data from CoreLogic and First American, combined with program data from EDA on grants for construction projects to create tract and county-level panels spanning from 2005–18. We also collected job location data from the US Census Bureau’s Longitudinal Employer-Household Dynamics program and information on disaster damage to small businesses from the US Small Business Administration. We estimate the quasi-experimental treatment effect of EDA construction grants through a two-way fixed-effects regression.