Advancing Urban Policy:
Economic Development  
January, 2014 


Advancing Urban Policy, the monthly e-newsletter of the Maxine Goodman Levin College of Urban Affairs at Cleveland State University, celebrates its first anniversary with this January, 2014, edition. This edition features research and thought leadership from across the country related to Economic Development. It highlights articles on state and local trends, strategies for economic renewal, Innovation Districts, investment in regional innovation clusters, the Arts and Culture Sector as catalysts to economic vitality, and more... Future editions of Advancing Urban Policy will feature topics related to Community Development (February) followed by Nonprofit Management (March) and City Management (April). Your ideas and submissions are welcome. They may be sent to:


Edward (Ned) W. Hill, Ph.D., Dean  



State Trends   


Top Trends in State Economic Development


In the past two years, many states seeking to move from economic crisis to recovery have updated their economic development strategies and launched new development initiatives. Those states have generally focused on the building blocks of their economies-entrepreneurs and innovation, workforce, investment climate, support for businesses in expanding their markets, and a stronger connection between universities and the state's economy. Just as importantly, they have focused on blending those elements together to increase their state's rate of economic growth and provide their state's citizens with more and better paying jobs.


Six important trends have emerged as governors have updated economic development strategies and introduced new initiatives; states are: (1) Focusing on the relationship between the state and its regions in fostering economic development, (2) Emphasizing job creation from within the state, (3) Strengthening their support for advanced manufacturing, (4) Creating partnerships to meet industry's demands for talent, (5) Raising expectations for universities to bridge the gap between research and commercialization, and (6) Stepping up business export initiatives.


From these economic development strategies, three overarching lessons can be drawn. First, many states have concluded both  that companies already doing business in the state are the most likely to create new jobs and that the entrepreneurs leading the fastest growing companies should be a focus of economic development efforts. Second, as states have learned more about what type of support growing companies need, they are emphasizing policies and programs that have strong industry buy-in and participation. Such programs include industry-designed-and-supported workforce training, new intermediary organizations to ensure access to research and development at universities and other institutions, and export assistance tailored to companies' age, stage, and experience in international markets. Finally, with the experience gained from practicing cluster-based economic development strategies, states are increasingly assured that they know how to strengthen the nation's competitive advantage through an embrace of innovation hubs and ecosystems.




Metropolitan Economics 


How Federalism Has Failed Cities...and Also Might Reinvigorate Them


America's cities and metropolitan areas constitute the engines of the national economy and our centers of trade and investment. They deliver and help finance public goods and influence the shape of the built environment, the physical space of communities, and, hence, how individuals negotiate their personal and professional lives on a daily basis. Yet cities and metropolitan areas cannot go it alone. Their efforts depend on the support of federal and state governments. State and federal governments are-through mandatory entitlements, tax incentives, and spending programs-the largest single investors in cities and metropolitan areas. They set the regulatory rules of the game by which cities and metros (and their companies and core institutions) grow advanced industries, attract global talent, and compete on the world stage.


The type of federalism that drives economic development in the 21st century is not the traditional "dual sovereignty" that splits power between federal and state governments according to subject matter, but a form of collaborative federalism in the service of cities and metros that set priorities and lead implementation. This requires a re-sorting of the roles and responsibilities of government that focuses on how the constitutional sovereigns-the state and federal governments-interact with their city and metro partners across the private and public sectors to co-produce the public good.


Game Changers


Five Opportunities for U.S. Growth and Renewal


Over the past five years, the McKinsey Global Institute has studied the performance of the U.S. economy from multiple angles, including the jobless recovery and labor market mismatches, large multinational companies and eroding competitiveness, the productivity challenge, savings and the demographic transition, and deleveraging from the financial crisis.Drawing on this body of work, game changers, which are the catalysts that can reignite growth and re-establish a higher potential trajectory for the U.S. economy, have been identified. Five game changers are discussed in relation to technology breakthroughs, changing costs of capital, labor, and energy, and policy innovation at the state and local levels. Moreover, the five game changers presented are mutually reinforcing. The shale boom, for example, is boosting trade competitiveness, particularly in energy-intensive manufacturing, as the shift in input costs caused by cheap natural gas has made the United States a more attractive place to base production. Big data can play a role in raising the productivity of knowledge-intensive manufacturing for export, maximizing infrastructure assets, and facilitating new personalized digital learning tools. Shoring up U.S. infrastructure is necessary to capture the potential of the shale energy boom and facilitate greater trade.


These opportunities can exert two types of economic impact: more immediate demand stimulus effects that can get the economy moving again in the short-term, and longer-term enabling effects that build competitiveness and productivity well beyond 2020. More subtly, concerted action to realize these opportunities can build general confidence that encourages investors, companies, and would-be entrepreneurs to focus their energies on the United States, creating a positive cycle. In addition, the game changers will have far-ranging economic, social, and policy implications. Although the benefits of pursuing these goals simultaneously would vary across different parts of the U.S. economy, the resulting complementary effects would enhance the nation's overall competitiveness, productivity, innovation, and quality of life. 


Entrepreneurship and Innovation Clusters


The Road through the Rust Belt: From Preeminence to Decline to Prosperity


In the late 20th century, American cities as well as other areas of the world experienced a major shift from heavy manufacturing to service-based economies. No more could cities rely on factories and other manufacturing entities to keep their people employed and their public coffers full. With the decline in industries came an increase in poverty-for  individuals and for cities-and the need for public policies to help combat it.


The Road through the Rustbelt: From Preeminence to Decline to Prosperity in Midwest U.S. Industrial Cities addresses a range of issues related to the renewal and attainment of prosperity in these cities. The contributors, each associated with the Maxine Goodman Levin College of Urban Affairs at Cleveland State University, discuss the reasons for the decline of Rust Belt cities, including globalization, energy policy-related issues, and even the impact of air conditioning on location decisions. They also detail many of the entrepreneurial efforts undertaken in cities like Cleveland that are helping to reinvigorate once-depressed areas, offer suggestions related to investments in workforce training and current energy policy, critique the use of economic development subsidies, discuss the success of clusters at reviving old industrial cities, and provide cultural insights on business practices in China. Overall, this book does not offer a one-size-fits-all solution to the economic woes still facing many of the depressed Rust Belt cities; rather, it offers a multitude of ideas that could be used to stimulate entrepreneurship and generate prosperity.  


Note: Available for Purchase 


U.S. Economic Development Administration Invests $520,000 to Grow Healthcare Regional Innovation Cluster in Central Maryland


On September 10, 2013, the U.S. Department of Commerce's Economic Development Administration announced a $520,000 grant to the Economic Alliance of Greater Baltimore and BioHealth Innovation of Baltimore, Maryland, to establish the Healthcare Regional Innovation Cluster (H-RIC) initiative. This new program will advance Central Maryland's ability to commercialize promising technologies. The innovation cluster will be an effort to better coordinate existing medical technology resources and expand services to improve the flow from research labs to the commercial market. Strengthening the connection between state research institutions and federal assets, such as the National Institutes of Health and National Institute of Standards and Technology, will be a core goal.  



Regional Innovation Clusters Begin to Add Up


This article discusses the Obama Administration's approach to economic regionalism, which is epitomized by its programs to stimulate regional industry clusters with small matching grants usually in the $1 million to $2 million range. There have been challenges to this approach, stemming from the perceived need for large-scale interventions to combat the enormity of the nation's economic problems. After all, it has been frequently stressed that the nation has a lot of work to do to reorient a drifting U.S. economy beyond consumption and more toward innovation, production, and exports; so no wonder people have hankered for more heft in Washington's economic responses. Surely, for that matter, the desire for more weighty action explains part of the interest that has been generated by the Administration's $1 billion proposal (mentioned in the State of the Union address) to create a network of 15 institutes for manufacturing innovation around the nation. And yet, what if small regional innovation clusters add up to spur economic growth?


There are now 56 federally supported regional cluster initiatives. There are some 18 advanced manufacturing collaborations, working on new materials, new processes, new control systems, and skills development in places as diverse as East Tennessee and Iowa and Southern Arizona and Greater Philadelphia. There are 10 clean energy technology projects ongoing in Southeast Michigan, Florida, San Diego, Oregon, the Carolinas, and elsewhere. There are initiatives working to rally various actors in the food industries of New England, Bristol Bay, and the Finger Lakes region. And there are other efforts focused on IT, the space economy, water technology, and wood products-all collaborative, all aimed at convening the actors in a regional cluster, coordinating disparate efforts, and reducing the risks of innovation and investment. Beyond all of that, the Economic Development Administration identifies another 19 regional innovation projects that have been funded through the EDA's i6 program. Similar to the cluster efforts, the i6 effort provides matching support to innovative initiatives that propose accelerate technology commercialization, new venture formation, job creation, and economic growth in U.S. regions.


The Obama Administration's "small bore" regional initiatives in economic development are beginning to add up to something meaningful. As of now, some 74 cluster initiatives and region-focused innovation efforts are underway, helping to catalyze more linked effort and creative economic development in the nation's regional centers of innovation. Through these initiatives some $250 million is being used to raise matching money and catalyze regional efforts to strengthen the nation's regional innovation ecosystems. It appears that well-designed cluster and accelerator strategies-ones that require sizable local matches through competitive award processes-are a low-cost way to stimulate a significant amount of collaboration, innovation, and new economic activity in the local economic regions that are the ultimate source of national prosperity.


Innovation Clusters: Examining the Role of Federal, State and Local Government


Officeholders generally strive to do pretty much anything they can to keep jobs in their districts - at the top of the list: encouraging big employers to stay in town while persuading new ones to move in. Governments end up bidding against each other to attract large firms, and, as a 2010 study from MIT, Harvard and U.C. Berkeley shows, the result can be a zero-sum game, with winners and losers. In such battles to attract employers, tax-based incentives are a favored tool, even as their use has been associated with higher rates of corruption. Once rare, tax-increment financing is often used to build infrastructure demanded by big firms-roads, rails, enlarged ports, or new facilities. But such deals can be opaque and have the potential to leave local authorities with substantial debt if deals are too generous or projections overoptimistic.


Alternative strategies exist that are place-based or sector-focused. Federal empowerment zones focus on specific neighborhoods in need of jobs and housing. Regions and cities can also create "innovation districts" or "research parks" to attract small businesses, startups or even specific industries such as biotechnology. Higher education and pharmaceuticals are popular targets. A 2012 report from the U.S. Census Bureau and the University of Maryland found that "young firms" can create substantial employment-in 2010 alone, 2.3 million jobs. A potential advantage of bringing in many small companies-particularly those that require analytic and social-intelligence skills-is that some research has shown that they benefit from proximity to each other, something known as a clustering effect. In turn, such business agglomerations can drive additional growth. 




Big Idea 2014: Goodbye Silicon Valley, Hello Silicon Cities


As the United States slowly emerges from the Great Recession, led by our cities and metropolitan areas, a remarkable shift is occurring in the spatial geography of innovation. For the past 50 years, the landscape of innovation has been epitomized by regions like Silicon Valley-suburban corridors of spatially isolated corporate campuses, accessible only by car, with little emphasis on the quality of life or on integrating work, housing, and recreation. That model now appears outdated. Innovative companies and talented workers are revaluing the physical assets and attributes of cities. A new spatial geography of innovation is emerging and, in 2014, it will reach a critical mass worthy of recognition and replication. In this new model called the Innovation District, clusters of leading-edge anchor institutions and innovative firms are connected with supporting/spin-off companies, business incubators, mixed-use housing, office, retail and 21st century urban amenities.


Why is this happening? Profound demographic, economic, and cultural shifts are radically altering the preferences of both firms and people, re-forging the link between economy-shaping and place-making. With the rise of open innovation and networked idea generation, the imperative to collaborate has expanded to a broad group of knowledge-intensive sectors, including science- and technology-heavy fields such as chemicals, biotechnology, telecommunications, and semiconductors. No single company can master all the knowledge it needs; rather, innovation relies on a network of connected firms. In short, companies need to collaborate to compete. Together, these trends are fundamentally altering how firms and people interact, how ideas flow, and how places are physically designed. Innovation Districts embrace the redesign of buildings and office spaces in support of collaboration and open innovation, and they provide the physical and social platform for entrepreneurial growth-incubator space, collaborative venues, social networking, product competitions, technical support and mentoring. 




Arts and Culture


How Cities Can Nurture Cultural Entrepreneurs


Since the Great Recession, American mayors and city councils have boosted investments in arts and culture as creative place-making to improve the quality of life; to attract residents, managers and workers; and to welcome visitors. Many city leaders are newly aware that artists bring income into the city, improve the performance of area businesses and creative industries, and directly create new businesses and jobs. Because of extraordinary levels of self-employment, artists often choose cities of residence based on factors other than job and employer locations. Their innovative challenges differ greatly from those faced by scientists and engineers. Artists and related cultural workers tend to fall through the cracks in traditional workforce and small business development programs. As a result, American cities have explored new ways of supporting artists that include space provision, artist-targeted websites and marketing projects, incorporating artistic work into city enterprises, and entrepreneurial training programs tailored to the realities of arts and design as occupations.


This policy brief summarizes reasons for and variations in new initiatives to spark cultural entrepreneurship, sampling bottom-up experiments and providing a menu of options for cities of all sizes and character. The brief also counsels city leaders to focus on what is distinctive about their cities, rather than replicating generic strategies elsewhere (e.g. large, expensive arts venues). Via references for further reading, it directs city leaders to various resources for exploring place-appropriate creative entrepreneurship policies. 




How the Arts and Culture Sector Catalyzes Economic Vitality


Terms such as creative economy, creative class, and cultural economy are becoming more common among urban planners, arts administrators, economic developers, and business and municipal leaders. These terms reference a variety of types of jobs, people, and industries, including the sectors of visual, performing, and literary arts, as well as applied fields like architecture, graphic design, and marketing. Whatever label is used, this use of terminology linking culture and the economy indicates recognition of the connections among the fields of planning, economic development, and arts and culture. The activities of the arts and culture sector and local economic vitality are connected in many ways. Arts, culture, and creativity can (1) Improve a community's competitive edge(2) Create a foundation for defining a sense of place, (3) Attract new and visiting populations, (4)Integrate the visions of community and business leaders, and (5) Contribute to the development of a skilled workforce. Competition, definition, attraction, integration, and continued development are all pivotal aims for economic development professionals. Traditional outcomes of economic development in planning include job creation, increased tax revenues, increased property values, increased retail activity, and more sustained economic vitality. These goals are often pursued through programs such as workforce development, recruitment, amenity packages for firms, local property investment, and policies that support business. When combined with creative approaches, these traditional programs can create a richer context for economic development.


To pursue economic development projects with a creative approach, there are four key points to consider: 

  •        Economic development is enhanced by concentrating creativity through both physical density and human capital. By locating firms, artists, and cultural facilities together, a multiplier effect can result. 
  •       The recognition of a community's arts and culture assets (and the marketing of them) is an important element of economic development. Creatively acknowledging and marketing community assets can attract a strong workforce and successful firms, as well as help sustain a positive quality of life.  
  •        Arts and cultural activities can draw crowds from within and around the community. Increasing the number of visitors as well as enhancing resident participation helps build economic and social capital. 
  •        Planners can make deliberate connections between the arts and culture sector and other sectors, such as tourism and manufacturing, to improve economic outcomes by capitalizing on local assets.


Cashing in on Arts and Culture


The U.S. Bureau of Economic Analysis (BEA) and the National Endowment for the Arts (NEA) released prototype estimates from the new Arts and Cultural Production Satellite Account (ACPSA). This is the first federal effort to provide in-depth analysis of the arts and cultural sector's contributions to current-dollar gross domestic product (GDP). According to these new estimates, 3.2 percent-or $504 billion-of current-dollar GDP in 2011 was attributable to arts and culture. In comparison, BEA's estimated value of the U.S. travel and tourism industry was 2.8 percent of GDP.


In addition, the study found that the leading contributing industries were motion picture and video production, advertising services, cable television production and distribution, publishing, and the performing arts. Furthermore, the gross output of arts and cultural production (ACP) was $916 billion; advertising output held the largest share of ACP with an output of $200 billion, or 20 percent of all arts and cultural commodities. The second largest share was arts education with an ACP output of $104 billion. Cable television production and distribution with $100 billion in output, and "motion picture and video goods and services" with $83 billion in output had the third and fourth largest shares.


NOTE: See also Remix Cleveland: The Cleveland Music Sector and Its Economic Impact from the Maxine Goodman Levin College of Urban Affairs at Cleveland State University (10/1/11).    





Metro Areas with the Most Blue-Collar STEM Jobs


Jobs emphasizing science, technology, engineering, and math (STEM) skills have long conjured up images of research universities and corporate offices. Many such STEM-heavy jobs require a bachelor's or advanced degree. But what's often not talked about is the roughly equal number of STEM jobs found on factory floor shops, construction sites, and other blue-collar workplaces.


A Brookings Institution study makes the case that policymakers are overlooking the role these blue-collar STEM jobs play in the economy, finding far more STEM workers than previous estimates. About 26 million jobs (20 percent of the U.S. workforce) required knowledge of at least one STEM field in 2011. About half of these jobs did not call for a four-year degree, paying an average salary of $53,000, according to the report.



Which States Have Recovered the Most Lost Jobs?


While employment has steadily climbed since the recovery began, only a select few states have seen jobs return to pre-recession levels so far. Updated Labor Department estimates show the extent to which states are regaining their economic footing. The U.S. has recovered 5.3 million jobs since job losses bottomed out, still about 2.2 million below pre-recession levels. North Dakota experienced a 20.6 percent gain in employment since the recovery began, by far the nation's largest increase. The state's population also jumped, accordingly. Texas (8.6 percent), Utah (7.8 percent) and Indiana (6.4 percent) recorded the next-highest percentage increases over the past four years.


The recovery thus far is especially bleak when assessing the share of the working-age population currently employed. Heidi Shierholz at the Economic Policy Institute examined the employment-to-population ratio (EPOP) for individuals between the ages 25 and 54, finding the most recent jobs data indicates the country has made little progress--only one-fifth of the way to making up for the low reached during the Great Recession. At this rate, the recovery will drag on another six to eight years, by most estimates. 



Local Areas Face Challenges Helping Employers Fill Some Types of Skilled Jobs


Based on survey results for calendar year 2012, the U.S. Government Accountability Office (GAO) estimates that most local areas used various sources of information to identify occupations that are in demand (i.e., available jobs and occupations that are projected to grow). Local areas found all of the sources of information they used to be at least moderately useful. To identify occupations that are in demand, GAO estimates that nearly 90 percent of local areas used state job banks and occupational projections, both of which are funded by the Department of Labor (DOL). In addition, 93 percent of areas used at least one local initiative, such as a partnership with the local economic development agency, to identify such jobs. As compared to other sources, areas reported using local initiatives because they provided more detailed information and better reflected local employers' needs.


To guide participants toward training, most local areas required them to complete certain activities, such as meeting with a case manager to discuss training options (80 percent) or completing a skills assessment (78 percent). Most local areas faced challenges in guiding participants toward training. Specifically, local areas faced challenges related to participants' lack of financial or work supports, such as: child care or transportation (67 percent), participants' lack of the basic skills necessary even to participate in training (66 percent), difficulty finding training providers who could quickly adapt curricula to employers' changing needs (62 percent), and high training costs (54 percent). However, in 57% of local areas, these challenges did not affect their ability to guide participants toward training.




Business Incubators: Tools for Local Enterprise Development


Local business creation is frequently identified as a priority for economic development and growth. Local firms are often targeted because they tend to remain in the community, bring revenue into the local economy, and use local resources as inputs for their business. Consequently, cities often seek to support local entrepreneurs by providing financial and practical assistance while they develop their enterprises to the point where they become self-sufficient. Incubators are among the tools that can be employed to foster local business creation. Traditional business incubators are buildings that house several new businesses under one roof, an arrangement that takes advantage of economies of scale and other synergies to assist firms through their perilous start-up periods. Full-service incubators typically provide their clients flexible space and affordable rents, shared business services, business development training and coaching, financial assistance, and the opportunity to network with peers. One of the most popular offerings of a full-service incubator is its collection of shared business services, which represent the kind of resource pooling that makes incubators a unique and effective business creation tool.


Recent years have seen the rise of incubators designed to support the development of micro industries. They bring together companies that are in the same business but are not necessarily competitors. Bringing together businesses with common needs permits the incubator greater efficiency in providing assistance. Industry-focused incubators also enhance opportunities for networking by linking companies that are more likely to complement one another. The challenge of industry-focused incubation is acquiring and paying for the specialized equipment and systems that are often required. Increasingly popular are virtual incubation programs-that is, incubators without walls that offer no rental space but instead coordinate the activities of community service providers that assist local entrepreneurs. Virtual incubators are especially popular and efficient in rural areas, where suitable buildings are either nonexistent or in short supply and resources are limited and spatially dispersed. Furthermore, virtual incubation can avoid the distractions of real estate management that have preoccupied residential incubators at the expense of their business development function.Although the concept of virtual incubation has evolved very slowly, interest in it is growing, particularly for community and regional incubation systems. Regional incubator systems consisting of networks of individual residential incubation programs operating in local communities in a defined geographic region are becoming more popular in rural areas with limited resources and markets. 


Collaboration for Economic Growth


Converting Funder Collaboration into Collective Impact


Once known as a "rust-belt" region, Greater Cleveland is on the cusp of economic recovery-thanks, in part, to the collaborative efforts of local organizations to recruit, retain, promote, and open contracting bids to people of all ages and abilities, races, and religions. Headquartered within an eight-county area in Northeast Ohio, a coalition of diversity-management leaders-led by the economic development group Greater Cleveland Partnership-is bringing wealth to underserved communities as the region experiences a post-recession renaissance. A recent Brookings Institute report found Cleveland is on the road to resurgence, ranking 10th among 50 U.S. metro areas. That's because of its diversification from a primarily industrial base to "new economy" sectors, such as health care, biosciences, and high-tech industries. Based on annual employment growth and per-capita income, the study found Cleveland's income jumped 4.1 percent from 2009 to 2010 compared with pre-recession years (1993-2007).


What's prompting change in Cleveland (population 430,000) and surrounding areas? One factor is the leadership commitment to provide opportunities for all, including the nearly 60 percent Black and Latino population in the metro area, as the Cleveland Group Plan Commission rolls out an aggressive revitalization plan that includes a new 100,000-square-foot Cleveland Medical Mart and adjoining 230,000-square-foot convention center, a $700-million downtown casino and more. Cleveland's capital-improvement projects and the area's low cost of living (almost 4 percent less than the national average, reports Greater Cleveland Partnership, are spurring jobs and attracting businesses and "creative" thinkers from major metro areas such as New York. When coupled with the leadership commitment to diversity and the investment in emerging sectors, Cleveland is poised for potential growth. 


NE Ohio Economic Development Groups Tout Benefits of Their Collaboration


Civic and political leaders in Northeast Ohio talk at length about working together regionally. But it may be the area's private-sector business development and attraction organizations that make the best effort at getting regionalism to work. Ten of those organizations report that, as a group, they worked last year with companies and entrepreneurs that expect to create 36,363 jobs and $1.8 billion in capital investment in Northeast Ohio. The jobs and investment are expected to come from companies in many sectors; the businesses include expanding health care and biotechnology firms and drillers rushing to tap into the recently discovered oil and gas fields in Ohio's Utica shale region. While business investment decisions are complex and often based on internal factors, these organizations help untangle red tape, identify public and private financial partners, and show companies locations for offices or plants. Much of the investment is in the region's traditional stronghold-manufacturing. There, Canton's Timken Co. is investing $310 million to expand its specialty steel production, and Alcoa Corp. is spending $100 million to rebuild one of the world's largest forging presses in Cleveland.

In a 36-page
report, the 10 organizations also highlight commitments totaling $212 million in early-stage investment in 108 Northeast Ohio companies. The report, their first as a group, represents the maturing of the relationships between the 10 organizations. The report details a regional competitiveness strategy that, the groups hope, will accelerate Northeast Ohio's economic growth. The other organizations include five regional business development groups-the Greater Akron Chamber, the Greater Cleveland Partnership, Regional Chamber of Youngstown and Warren, the Stark Development Board, and Team Lorain County. It also includes four specialized nonprofits-BioEnterprise Corp., which works to nurture health care and bioscience companies; JumpStart Inc., which focuses on entrepreneurial ventures with high growth potential, Magnet, the region's manufacturing advocate, and NorTech, which focuses on technology companies. Each organization plays a specific role and, because of an effort by JobsOhio, the nonprofit that has taken over the state's economic development role, all the organizations even share a common system for tracking firms and entrepreneurs. 



Metros: Freight and Manufacturing


CMAP Explores the Link between Freight and Manufacturing in Metropolitan Chicago


On their own, the freight and manufacturing industries are vital to Metropolitan Chicago's economy and standing as a global commerce center. Taken together, the two interwoven and specialized industries are Chicago's built-in advantage and a big reason why it is "poised to translate recent manufacturing momentum into regional economic growth," the Chicago Metropolitan Agency for Planning asserts. Starting in mid-2012, CMAP-a regional planning organization for seven Northeastern Illinois counties and an EMSI client-published research on the freight and manufacturing industries with individual drill-down reports. In August 2013, it released a complementary report, The Freight-Manufacturing Nexus: Metropolitan Chicago's Built-in Advantage. The authors of the new report show how Chicago's strongly concentrated cluster of freight industries support regional manufacturing competitiveness. 



Metro Freight: The Global Goods Trade that Moves Metro Economies


One of the lessons from the Great Recession is the need to grow and support the tradable sectors, typically manufacturing and high-end services, of our metropolitan economies. But to drive these tradable sectors, metropolitan areas need physical access to markets. Metropolitan freight connectivity enables this access and the ensuing modern global value chains. Without it, trade cannot occur. This report establishes the economic rationale for metropolitan goods trade, describing why, how, and what these areas exchange with each other. It makes these key points:

  • Metropolitan economies cannot function unless they trade goods with one another.
  • Recent global trends make domestic and international trade more prevalent and more competitive than ever
  • The rise of global value chains forces metropolitan areas to assess their relationship to the global economy
  • To maximize trade's economic returns, metropolitan areas need a firm understanding of their economic position as well as a supportive policy framework





How to Stop the Economic Development Wars


The dominant paradigm, incentive-fueled competition among state and local governments, does not create economic prosperity. Two big facts confirm this conclusion. First, as the New York Times reported in 2012, states, counties and cities are giving up more than $80 billion each year to companies in tax breaks, outright cash payments, and buildings and worker training. Second, the wages of the taxpayers who have been footing the bill for this stuff have been flat since at least 1979. Indeed, some economists have concluded that we are now in an economy whose normal state is one of mild depression as a result of inadequate demand. It seems obvious that the lack of demand is the result of depressed wages.


The bankruptcy of the current approach to economic development has reached its apotheosis in the Boeing deal in Washington State, in which the corporation demanded both a massive subsidy from the state and significant wage and benefit concessions from its workers. The state acquiesced, granting Boeing $8.7 billion-the largest state-tax giveaway in the nation's history-to keep production of the new 777x airliner in the Seattle region. The president of the machinists' union voted to reject the deal. The result of the union's rejection, the company says, is that it will open up the competition to other potential locations for the 777x assembly. Other states will now scramble to see how much they can offer Boeing. In the case of global corporations like Boeing, state and local governments are simply unequal to the task. The U.S. needs a national law that prohibits corporations from extracting bribes from state and local governments and bans governments from donating tax dollars to private entities-a sort of domestic equivalent of the Foreign Corrupt Practices Act, which prohibits American companies from bribing foreign governments.


Some will argue that such a law would damage America's global competitiveness and drive companies to outsource even more of their work abroad. However, America is a magnet for global talent because of the quality of life offered here, and current economic trends are damaging to that quality of life. With the predators reined in by a federal law, states and localities could more safely try alternative forms of economic development such as those championed by the Democracy Collaborative. Its model, called Community Wealth Building, emphasizes democratization of wealth, focuses on place and local economy, promotes broader ownership of capital, seeks to anchor jobs locally, stops the leakage of dollars from communities and supports individual and family wealth-building. 


A Multilevel Approach to Local Economic Development Incentive Adoption


Rubin sounded an alarm indicating that economic development practitioners were less than strategic in their economic development incentive adoption when he declared that developers "shoot anything that flies, claim anything that falls." This article builds on the work of those who have focused on the determinants of incentive adoption in three ways. First, relying on matched cases of survey respondents to the 1999 and 2004 International City/County Management Association Economic Development Survey improves on using a single survey. Second, unlike previous efforts that relied mostly on ordinary least squares estimators to predict the total number of approaches adopted, this article uses a count model and distinguishes between types of approaches. Finally, this article accounts for city- and state-level impacts. This article finds that economic development decision-making is strategic, partly determined by state-level effects, and is dependent on the types of economic development practices.


Note: Article for subscription or purchase.

Immigration and Economic Growth


Immigration Reform:Implications for Growth,Budgets, and Housing


Effective immigration reform can be a powerful instrument of economic revitalization. By increasing the overall population and particularly the number of working-age labor force participants, reform can help expand the economy, contribute to higher overall average wages, generate more consumer spending, and spur new demand for residential housing construction. By supporting stronger economic growth, immigration reform can also reduce the federal budget deficit substantially.


A study conducted by the Bipartisan Policy Center estimates that immigration reform would expand the U.S. labor force by 8.4 million people and cause the economy to grow an additional 4.8 percent over the next 20 years. The analysis indicates that wages would initially fall due to the influx of labor, but would rise a total of 0.5 percent by the end of the 20-year period. During this period, immigration reform would also increase residential housing construction by $68 billion annually and provide an immediate boost to a housing market that has yet to fully recover. Finally, reform would lead to about $1.2 trillion in cumulative reduction in the federal budget deficit. A major benefit of immigration reform is that it can inject vitality into the nation's workforce. Under the reference case used in this study, just 0.8 million (6 percent) of the 13.7 million people that immigration reform would add to the U.S. population would be aged 65 or older. The addition of millions of new, younger workers would increase the ratio of workers to retirees and help our country respond to the fiscal challenges associated with an aging population.  



Advancing Urban Policy: Economic Development was created with counsel from the Levin College's Center for Economic Development; compiled by Jessica Murphy, graduate assistant; edited by Roslyn Miller, consultant. Inclusion in Advancing Urban Policy is for informational purposes only and does not imply endorsement by the Maxine Goodman Levin College of Urban Affairs or Cleveland State University. 


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