ABSTRACT
Economic development became a major state and local function as a result of postwar interregional population and capital shifts, sharp changes in the system of federal assistance to state and local governments, and the emergence of the international market system. State and local governments came to see themselves as stewards of their economies in a world where other states and cities—and indeed, other countries—were their competitors. The economic development function at the subnational level begins as a partnership between state and local governments in which the state is clearly the dominant partner. State government's role is to make basic strategic choices to guide state and local efforts to encourage investment, to establish elements of the business climate such as the tax and regulatory system, and to provide specific development assistance and incentives. Local governments fit into this state economic development framework, composed of strategic guidance, tax and regulatory climate, and incentives, in several different ways.
