This report examines the relationship between federal programs and policies and urban economic development. It provides both a conceptual analysis of the relationships and a review of the theoretical and empirical literature relevant to assessing policy effects. It is one of several in a broad study that examined federal actions in relation to aspects of the urban economic, residential, and fiscal environment. The purpose of this study is to determine capabilities for analyzing the effects of federal policies on urban areas. For analytic simplicity, the urban economy is conceived of as having three distinct but interacting sectors: the private business sector, the residential sector, and the urban public sector. This view permits consideration of the subset of federal policies that act directly on each sector, the subset of outcomes relevant to that sector, and the interactions among sectors. In this report those federal policies that directly influence economic development are discussed. Alternative definitions of "urban" are developed. Economic development variables that measure the influence of federal policies are defined. The network of relationships between policies and economic development are outlined, and federal policies are categorized according to how they influence economic development. It is indicated that summarizing the effects of the broad array of federal policies on urban economic development presented a number of difficulties. First, definitive evidence is hard to find. Second, studies have not assessed the relative importance of different federal programs. Finally, the process of economic growth and development is complex, and it is difficult to measure the relative contribution of factors that determine development. Emphasis was placed upon the shifts in economic development among three types of urban geographical units: urban areas in different regions, central cities and suburbs, and urban areas of different types. (Author/AM)