This chapter reviews how effectively various state and local government policies promote economic development. It examines the role of state and local fiscal policies and effects of specific programs that involve expenditure of public funds, and considers the expenditure side of budgets only as it enters the relevant tax literature. The chapter focuses on how such policies might be used to address the unique needs of specific types of nonmetropolitan regions. It provides an overview of the ways that certain broad policies and specific incentive policies influence economic development. The chapter explores the fundamental rationale for pursuing technology initiatives, and reviews different types of state programs with particular reference to those that offer promise for rural economies. A major public sector responsibility is the delivery of transportation, water, sewerage, electricity, and telecommunications services, though the role of actually producing the services may be shared with the private sector.