We study the long run eects of one of the most ambitious place based economic development policies in U.S. history: the Tennessee Valley Authority. We first conduct an evaluation of the dynamic effects of the TVA on local economies in the six decades since its inception. We find that TVA led to short run gains in agricultural employment that were eventually reversed, while impacts on manufacturing employment continued to intensify well after the program had scaled down. This pattern is potentially consistent with the presence of strong agglomeration economies and multiple steady states in the manufacturing sector. However, it is also consistent with models with a unique steady state and slow adjustment. To differentiate between these two possibilities, we estimate a simple dynamic
county level model of agglomeration that allows for multiple steady states. We find clear evidence of agglomeration effects, but no sign that these effects are strong enough to generate multiple steady states, suggesting that the gains to the TVA region will eventually be reversed. Moreover, we find little evidence of nonlinearity in agglomeration economies, implying the aggregate productivity
effects of place based development policies are probably limited.