Like politics, the process of economic development is intrinsically local. Communities vie ferociously for jobs, offering tax credits, infrastructure improvements, and in some cases cash to attract investment to particular regions, cities, or even neighborhoods. In the U.S., federal and state governments target resources towards particular areas in the hopes of stimulating investment, alleviating poverty, and in some cases even recovering from natural disasters. These place based policies, though hardly new, have just begun to attract serious attention from economists. 1 As evidence on the effects of these programs begins to trickle in, it is useful to develop a theoretical framework within which to evaluate them. To many observers, spatially targeted policies are a sign of waste – an unfortunate cost of the political process. Why after all should governments pay firms to move to less productive areas and incentivize workers to live in neighborhoods they don’t like? Moreover, serious questions exist about the winners and losers of such policies in a general equilibrium environment. I study here the welfare implications of place based policies using some stylized models of spatial equilibrium incorporating taste heterogeneity and agglomeration economies. I. Baseline Model Consider a continuum of workers of measure one, faced with the decision of locating in one of two communities j ��1 � 2 � where they will work and inelastically demand a single unit of housing. 2 Agents have quasi-linear preferences over local amenities and consumption. The value to worker i oflocatingincom-