Advancing Urban Policy:
Economic Development July, 2013
This edition of Advancing Urban Policy, the monthly e-newsletter of the Maxine Goodman Levin College of Urban Affairs at Cleveland State University, features research and thought leadership from across the country related to Economic Development. It highlights articles on public policy, impacts of gentrification, the Affordable Care Act, technology, innovation, shale development, economic resiliency, and more... Future editions will feature topics related to Community Development & Housing (August), Nonprofit Management (September), City Management (October), Environmental Policy (November), and Public Finance & Budgeting (December). We welcome your ideas and submissions. They may be sent to

Edward (Ned) W. Hill, Ph.D., Dean


Public Policy & Economic Development

Strengthening State Fiscal Policies for a Stronger Economy

Strengthening state economies and creating jobs, now and into the future, will require sensible and forward-looking state fiscal policies. States need to invest adequately in education, health care, transportation, and workforce development. To do that, they need to generate sufficient revenue, and they need to do so in an equitable and transparent manner.

Fiscal policies can help facilitate immediate job creation and prime states for long-term economic prosperity. In light of this, policymakers should restore state revenues quickly and target investments to get the economy back on track, avoid ineffective strategies and gimmicks that weaken the state's economy, protect state services and investments that create jobs over the long term to ensure a sustained recovery, and strengthen opportunities for families and children to contribute to the economy by taking steps to reduce income inequality, avoiding cutbacks in family purchasing power, and making sure families have the supports they need into the future.  

Metropolitan Economics

The Metropolitan Revolution

In the face of federal gridlock, economic stagnation, and fiscal turmoil, power in the United States is shifting away from Washington and toward major cities and metropolitan areas. Across the nation, these communities, and their resolutely pragmatic leaders, are taking on big issues that Washington won't.  They are reshaping the economy, and fixing the broken political system.  In The Metropolitan Revolution, Bruce Katz and Jennifer Bradley chronicle this sea change away from the ever centralizing government of the post-World War II era, showcasing examples of how ground-up innovations are solving tough problems and revamping U.S. economic relationships with the world.

Editor's Note: Book available for purchase


What Matters to Metros

Foundational Indicators for Economic Competitiveness helps community leaders identify factors that are associated with economic growth in mid-sized U.S. metropolitan areas in a post-recession economy. This work builds upon six previous iterations (called the Dashboard of Economic Indicators) and assesses the relationship of 55 variables to economic growth across four measures--per capita income, gross metropolitan product (GMP), productivity, and employment--between 1990 and 2011. This work was based upon research conducted by the Center for Economic Development at Cleveland State University's Maxine Goodman Levin College of Urban Affairs. 



 Economic Development Strategies

Supporting Growth-Oriented Small Business as a Community Economic Development Strategy

Communities across America are searching for strategies that can lead to greater economic development success. One approach that has been effective in many communities is to develop an entrepreneurship support system that focuses on growth-oriented small businesses as a way to drive greater economic growth. Studies have shown that it is the start-up and expansion of local small businesses (fewer than 100 employees) that produces the lion's share of economic growth in a community or region, rather than recruitment or attraction of businesses from outside the region through incentives and tax breaks.

Growth-oriented entrepreneurs have both a strong desire to grow their companies, and the potential capacity to realize sustained growth. These entrepreneurs want to scale up their businesses to reach external markets, thus expanding the economy of the region by bringing in new wealth in the form of investment, jobs and careers, and tax base. This new wealth then "recirculates" throughout the local economy and stimulates the growth of local retail and service businesses.



Homogenized Diversity: Economic Visions in the Great Recession

Across U.S. regions, the idea that the resilient region of the future is an economically diverse one has gained increasing popularity. To diversify and adapt to change, many regional plans propose supporting knowledge-based sectors, such as biotechnology, and using livable, walkable (re)development to boost economic activity.

This concern for resilience and its perceived connection to economic diversity took on new urgency as regions across the U.S. struggled to respond to the Great Recession.




Industry and Workforce

The Long-Term Employment Impacts of Gentrification in the 1990s

Empirical studies find gentrification is associated with a mild positive impact on the overall number of jobs in affected neighborhoods. Yet, compared to previous studies, research now suggests that gentrification directly contributes to the industrial shifts in urban labor markets from goods producing/handling jobs to service sector positions that are most often understood as macro-structural changes. This relationship was determined through the analysis of the impact of gentrification at the census tract level among a sample of 20 large central cities, from which evidence suggests that manufacturing jobs and wholesale establishments declined faster in gentrifying areas compared to non-gentrifying areas in the same city. Findings also indicate that industries that serve neighborhood demand--primarily restaurants and services--expanded faster.



Short Time Compensation and Job Preservation

Several evolutionary developments in the U.S. labor market over the past four decades have implications for structuring social protection programs for labor market participants. Two developments are particularly noteworthy: the aging of the labor force and changes in the mix of employer-initiated job separations.

The labor force has become older since the 1970s. Between 1974 and 1979, the influx of working age baby boomers caused the share of the labor force age 16 to 24 to consistently exceed 24 percent. In contrast, since 2000, employees between the ages of 16 and 24 averaged just 15 percent. The average age of the labor force increased from 37 in 1979 to 41 in 2011, by about four years.

Employers increasingly rely on permanent job separations rather than temporary layoffs when they reduce staffing levels. In the recessions of 1970, 1974, 1980, and 1982, higher unemployment was accompanied by an increase in the share of job seekers on temporary layoff. During the three most recent recessions (1991, 2001, and 2007) the temporary layoff share was stable while the share who were permanently separated increased much more than in the four earlier recessions. The numbers unemployed on temporary and permanent layoff in 2010 were 1.43 and 7.82 million, respectively.

A regression analysis of unemployment shares for two periods, 1967 to 1989 and 1990 to 2011, indicated that, had relationships from the earlier period held during the more recent period, 1.34 million more persons would have been on temporary layoff in 2010 and 1.43 million fewer on permanent layoff. The change in employer termination policies has had a measurable effect on the cyclical mix of unemployment.




The Affordable Care Act: Improving Incentives for Entrepreneurship and Self-Employment

Individuals contemplating leaving the security and stability of a company job to become self-employed must consider the implications for their health insurance, as well as the financial risks associated with launching a new business. In most states, leaving a job means leaving the guarantee of subsidized health insurance coverage sponsored by the employer for the uncertainty of the non-group health insurance marketplace.

Many economists and health policy experts believe that tying health insurance coverage to job status results in people staying in jobs that they might otherwise leave, a phenomenon called "job lock."

Afraid that they may be denied health insurance coverage because of pre-existing conditions, may be unable to afford the premiums, or may lose access to a trusted provider, many workers may decide to stay in their job, even if their skills and talents are not optimally deployed. However, under the Affordable Care Act (ACA), access to high-quality, subsidized health insurance coverage will no longer be exclusively tied to employment.




Technology and Infrastructure

State Science & Technology Institute (SSTI) Trends in Technology-Based Economic Development: Local, State and Federal Action in 2012

Unlike 2011's slate of sweeping new proposals and initiatives to reorganize economic development activities brought on by more than two dozen new governors in office, 2012 witnessed changes to state and regional tech-based initiatives on a smaller scale with states making more strategic investments. This pattern of heightened activity in the first year of a new gubernatorial administration with fewer proposals in the second year is typical, particularly in the 20 states with biennial budgets.




Technological Innovation, Resource Allocation, and Growth

Technological innovation measures can accurately predict productivity and output at the firm, industry, and aggregate levels. Capital and labor flow away from non-innovating firms towards innovating firms within an industry. There exists a similar, though weaker, pattern across industries. Cross-industry differences in technological innovation are strongly related to subsequent differences in industry output growth. These determinations were conceived through the process of overlaying patent data for U.S. firms from 1926 to 2010 with the stock market response to news about patents to assess the economic importance of each innovation.



Entrepreneurship and Innovation

Clusters of Entrepreneurship and Innovation

As cities face increasing global competition and fiscal constraints in the post-recession economy, many city leaders wonder from what source future growth will emerge. One answer to this question is innovation. Cities that create a culture of innovation and entrepreneurship will be better positioned for economic recovery, job creation, greater resiliency, and the potential for regional economic transformation. An agglomeration of these activities gives rise to economic clusters, yielding favorable economic consequence. The positive externalities of innovative and entrepreneurial practices add to political debate concerning the development of policy that encourages clusters.




Innovation, Entrepreneurship and Economic Growth in Lagging Regions

Governments invest a significant amount of resources in trying to promote economic growth in lagging regions, but in most cases with limited success. Providing policymakers with guidance about how best to target their scarce resources is hence of paramount importance. However, in order to do so, a clear understanding of what drives economic growth in these lagging regions is needed.

Most growth theories are based on the notion that the "human factor" is the real engine of growth. Regardless of whether the human factor highlights entrepreneurial and innovative skills or focuses on education and creativity, the role human capital in workforce is undisputed. The human factor and the exchange of knowledge--or knowledge spillovers--are the keys to the functioning of high-technology clusters. However, it is unclear how these growth theories apply to regions which are lagging economically and have a low-skilled workforce. It is important to be able to apply these theories to regions facing an array of economic barriers. Barriers such as low population, isolation from knowledge, and weak institutional arrangement can be reduced by implementing strategies that promote "home-grown" growth.

Editor's Note: Article by subscription or purchase


Economic Clusters and Regional Economics

Regional Appropriation of University-Based Knowledge and Technology for Economic Development

Economic development practitioners and scholars recognize the link between universities and regional economic development. It is predicated on the spillover of knowledge from universities to commercialization. The literature has focused on the supply side, which involves university research and technology transfer mechanisms. However, there is also a role played by the demand for university-based knowledge and university-developed technology. Links can be identified between businesses and the university as a key conduit facilitating the spillover of knowledge using data on the Department of Energy's Small Business Innovation Research (SBIR) program. Supply-side evidence on university research relationships and how the use of knowledge and technologies that flow from a university affect economic growth supports the idea that SBIR-funded businesses play a role in the spillover of knowledge from the creating organization to where that knowledge is used and commercialized. Results suggest that knowledge is systematically transmitted through university-related research.

Editor's Note: Article by subscription or purchase




Wisconsin Economic Future Study

The Wisconsin Economic Future Study compared the performance of Wisconsin's economy with eight select states that were classified as its competitors: Minnesota, Illinois, Michigan, Indiana, Ohio, Pennsylvania, Georgia, and North Carolina. Those competitor states are similar in size, industry composition, and competitive strength to Wisconsin. The study found that Wisconsin outperforms some and underperforms others on the key measures examined, with variations in performance from year to year. This work was based upon research conducted by the Center for Economic Development at Cleveland State University's Maxine Goodman Levin College of Urban Affairs.



Clusters, Convergence, and Economic Performance

Cluster-based agglomeration in regional economic performance is influential to new regional industry. Evidence shows that new regional industries emerge where there is a strong cluster environment. Industries participating in a strong cluster register higher employment growth as well as higher growth of wages, number of establishments, and patenting.

Industry and cluster level growth also increases with the strength of related clusters in the region and with the strength of similar clusters in adjacent regions. On the one hand, diminishing returns to specialization in a location can result in a convergence effect: the growth rate of an industry within a region may be declining in the level of activity of that industry. At the same time, positive spillovers across complementary economic activities provide an impetus for agglomeration: the growth rate of an industry within a region may be increasing in the size and strength of related economic sectors.




Investing in the Human Capital of Immigrants, Strengthening Regional Economies

Coming out of the Great Recession, slow economic recovery has plagued U.S. communities. Cities and regions are seeking strategies that will grow jobs in the short term and improve standards of living over the long term. Geographic regions can invest in the human capital and economic advancement of immigrants who are already living in their jurisdictions, to help boost short- and long-term growth. Programs and partnerships can unlock skills of immigrants with foreign credentials and build skills of immigrants who could advance in the market with targeted programs.

Editor's Note: Please see also the op-ed by Sanda Kaufman, Ph.D., at the end of Advancing Urban Policy: City Management, April, 2013: "Our Mental Models Must Match Realities: Immigration Not a Magic Bullet for Rebuilding Cities."


Regional Economic Capacity, Economic Shocks, and Economic Resilience

Regional economic resilience is the ability of a region to recover from an economic downturn within a relatively short period of time. Economic resilience can occur because the region's economy simply bounces back (i.e., because of favorable shifts in the demand for its products), the structure of predominant industries or occupations undergo change, or firms find a way to improve their competitive position (i.e., existing firms adopt better technologies or organizational forms or produce new products). Regional conditions prior to economic downturn can serve as indicators of potential resilience.


Ohio Economic Development

Moving Ohio Manufacturing Forward: Competitive Electricity Pricing

Today, the price of electricity has a powerful influence on the competitiveness of manufacturing because manufacturing industries are often electricity's largest consumers. Economic regulation of the electric utility business has changed very little over the last decade while regional and national policy makers debate the volatility of energy markets. The electricity industry, because of the large size of the units of its production, wholesale, and distribution, draws major benefits from the economy of scale. At the same time, energy efficiency has become the by-word of energy-intensive manufacturing businesses, which in the Midwest accounted for 60% of industrial fuel and feedstock energy use in 2006. In 2010, Ohio had the highest level of manufacturing activity among Midwestern states, resulting in value added mainly from the energy-intensive sectors such as primary metals, petroleum and coal products, chemicals, food, nonmetallic minerals, paper, and wood products. Overall, electricity pricing can impact manufacturing productivity.





Ohio Utica Shale Region Monitor

In 2011, drilling for oil and gas recommenced in the state of Ohio after a century of dormancy, due to recently developed technologies enabling the extraction of hydrocarbons from shale reservoirs that had previously been assumed impermeable and therefore uneconomical. This report by the Maxine Goodman Levin College of Urban Affairs at Cleveland State University analyzes two indicators of economic activity, sales receipts and employment, related to the early stages of Utica and Marcellus shale development in the State of Ohio. Tracking these two measures will assist in the preliminary detection of economic trends that are likely related to the growth of the oil and gas industries in Ohio. Data for these two indicators are readily available from the State of Ohio, which will facilitate the planned quarterly updates to this report.



The Economic Impact of the MetroHealth System

For 175 years, the MetroHealth System (MHS) has provided quality health care to the residents of the city of Cleveland and Cuyahoga County, Ohio, regardless of their ability to pay. Today, MHS is the third largest health care system in Cuyahoga County. From its headquarters on the near west side of Cleveland, MHS continues to successfully operate within a hyper-competitive health care market, a result of its ability to adapt to fundamental changes in the health care industry, declining revenues and public subsidies, and rising medical costs. Moreover, MHS has managed to operate both effectively and efficiently while persistently striving as an institution to provide quality care to its patients. This report presents the findings of a research study assessing the contributions of MHS to the economy and community. The impact of MHS is described both in terms of traditional economic impact measures and in terms of contributions made through community engagement. A variety of qualitative and quantitative data sources are used. The quantitative analyses focus primarily on the year 2011, though historical data back to 2007 are used on occasion to show changes and trends over time. The study was conducted by the Center for Economic Development at Cleveland State University's Maxine Goodman Levin College of Urban Affairs.


Advancing Urban Policy: Economic Development was created with counsel from Ziona Austrian, Ph.D., Iryna Lendel, Ph.D., Candi Clouse, Merissa Piazza; compiled by Jessica Murphy, graduate assistant; edited by Roslyn Miller, consultant.

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