EC 185 - Regional Economic Development

EC 185 - Regional Economic Development

EC 185 Regional Economic Development COURSE INTRODUCTION Overview Syllabus Expectations Service Learning Potential Tasks

What is Regional Economic Development? Why Regional Development Addresses: Declining urban areas, particularly those affected by loss of critical businesses (Connecticut Mills) Derby, Naugatuck, Ansonia Details development plans that impact output, employment, quality of life, etc.

Emphasis is usually on infrastructure, but need not be Bridgeport as local example History Home of major defense industries Sikorsky is what is left Vibrant downtown Major vacation destination for New Yorkers

Post-WW2 rapid decline in defense sector Downtown destroyed by arrival of malls that drew businesses out of area Result Stagnating Population 147,000 people (States largest city), but population is up only about 2% in last decade Poverty rate = 21% - Median HH income = $44,841 ($117,000 in Fairfield) Deterioration in housing stock (median value - $147,000,

$397,000 in Trumbull) East End largely abandoned in some areas One of poorest cities in the U.S. (surrounded by wealth) Attempts at Revival Bluefish Stadium and HarborYard Movement of HCC downtown Police Barracks SteelPointe

First Serious Attempt at Redevelopment Has shopping (Bass Pro, etc.) Supposed to have apartments, commercial space, etc. Originally $1 billion investment was planned Almost went casino route instead (problem with this) Golden Hill Paugussets sought land claim to set up casino Abandoned when courts did not agree

Currently.. City remains challenged by any measure Low per capita income, poor housing stock, poor schools Expenditure per pupil relativelyhigh (state, not local money), but outcomes poor (about $14,000 per student) Magnet Schools are having some impact CTs response to lawsuit over school funding (Sheff v. ONeill)

Notes on Reading Notes are taken from Stimson, Stough and Roberts, except as indicated on syllabus Stimpson, Chapter 1 Reconsideration of Regions in a global economy Development planning Is it actually anti-market At its best, planning, planning facilitates (speeds up) economic changes that provide positive benefits to a community At its worst, it can act against the inevitable, resulting in large expenditures that accomplish little e.g. trying to save the U.S. textile industry in a world where the cost of manufacturing textiles in the

U.S. is many times that in the developing world Skip core theories will be covered in detail at later time Sustainable Development unfortunately means whatever person using the word wants it to mean Discussion what is a useful paradigm for sustainability? Finally, SSR covers how we measure outcomes: Employment, production, resurgence of a city? Sometimes outcomes difficult to assess Development policy may slow

down decline rather than produce obvious resurgence Detroit? Lecture #2 Coates Article: Coates, D. (2007), Stadiums and Arenas: Economic Development or Economic Redistribution?, Contemporary Economic Policy, 25, 565-77. Key Points of Article: Subsidies make stadiums a poor investment Returns (employment, income) are small giveaways usually large

May be somewhat offset by psychic benefits (hometown pride in team) Application: Bridgeports Bluefish stadium and HarborYard Arena Benefits Costs Why less effective than predicted What to do now? Examination of Development

in State of Connecticut Background: State of Connecticut lagging behind other states in terms of growth Particularly post-2008 Used to be one of fastest growing states Had highest per capita income In top 3 in terms of accumulated wealth Reasons for Decline

Industry outdated and defense based Whats left is Sikorsky, Pratt-Whitney, Electric Boat modern sectors that support growth elsewhere are missing e.g. technology-based industries Present (2015) back to 2011 Maryland $75,847

73,971 $72,483 $71,122 $70,004 District of Col $75,628

umbia Hawaii $73,486 71,648 $67,572 $66,583

$63,124 69,592 $68,020 $66,259 $61,821

Alaska $73,355 71,583 $72,237 $67,712

$67,825 New Jersey $72,222 71,919 $70,165

$69,667 $67,458 Connecticut $71,346 Key Concerns..

Disparate incomes Near highest in the nation v. issues in Norwalk and Stamford Lack of manufacturing employment removes one of standard means of achieving middle class status Much of income growth is spillover from New York City Dependency leaves State vulnerable Measures of Well-Being in Cities Local to Fairfield

Connecticut Economic Resource Center (CERC) Town Median HH Income Manufacturing Employ Fairfield $120,100* 636 Norwalk 80,8962,495 Stamford 81,6003,786 Westport $166,307 455 Greenwich $119,500

224 Out-Migration as a symptom Connecticut is losing residents as job opportunities are better elsewhere Problem: State spends resources to educate students take embodied talent with them when they leave Cost of living too high to lure job-seekers to State (particularly housing)

Example Moderately-priced housing market in Trumbull Entry-level is $300,000 Same house in Ohio might be $100,000 Tiffin, OH (College Town), $108,000 buys you this: Result is Stagnant or no

Growth Creates funding problems for cities Particularly now that the State as a whole is in a budget crisis 2017 budget disaster Incumbent upon cities/towns to pursue growth policies Such initiatives have been common in other states: RTE 128 technology corridor in Boston, Fairfax, VA, etc. Tolland, CT has its OWN corridor

State itself is very late to the game, which increases the challenge Week #3 Central Place Theorem/Market Areas (SSR 1.5) What is a Central Place? A large, usually urban center that drives economic activity in an area Periphery is organized around pull from Central Place Usual U.S. situation:

Large city (e.g. Chicago) where concentrated economic activity takes place Surrounded by regions of high economic activity (suburbs) Why Important? Economic Activity is driven by vibrancy of city Activities and available services (?) Rudimentary Banking, shopping, restaurants, etc.

Secondary Transportation services (bus, rail) Hospital(s) Fairfield v. Bridgeport Fairfield shopping, banking, restaurants, other services No hospital, rail transportation

Bridgeport Ditto, although generally not in city center (North Bridgeport) 2 hospitals, rail, bus lines Bridgeport might be considered a Central Place, but not in the way in which major cities are considered a CP Fairfield is not, although the unique difficulties facing Bridgeport make Fairfield a more vibrant economic area Central Place theorem inevitably implies a degree of

reliance If I want to take Amtrak, I have to go to Bridgeport Services and City/Town Relationships Descriptive City, suburbs and periphery Far periphery would be farmland Affect of cities small In Connecticut: Few cities have this kind of affect

Large cities Stamford, Bridgeport, Hartford, Waterbury, New Haven, New London By national standards, these are very small cities Bridgeports population is only 144,000 Spillover effects small is a major issue for development in the State Growth Poles Large economic areas that influence growth across a region

Deliberate or natural Natural refers to poles that arose without deliberate policy Example: Large cities that formed due to available transportation resource (river) Or, formed due to existence of significant natural resource (minerals) Deliberate Growth Poles Government investment in a region to spur growth Common example at moment might be energy

investments Ideally, resources poured into area then spill over into other parts of the region, spurring growth Should target relatively poor areas or those experiencing decline Discussion: Detroit and other post-industrial cities Parr Article Review and Assessment

Alternative to growth poles Corridors Typically high-tech or some other sector with similar spillovers Route 128 in Boston (failed) Connecticut very late to the game here Way behind other states With GE departing, suddenly interest in trying to find a substitute (also UBS departure from Stamford) Business environment in the State is very bad hard to overcome that Discussion

Class Presentation by Fairfield University Staff Member (TBA) Detailed Overview of Class Project Internal information from Fairfield Financials, employment, student spending, internships, service-learning May have to use survey data to measure student spending On goods, housing, transportation, social life, etc.

Much of money is external (from households out of state) Has larger impact What other influences might be important? How to break up project into manageable pieces? Assignments will allow me to grade individual contributions Groups of 4-5 people

(Group 1) Internal financials and employment (Group 2) Mapping out economic influences which businesses likely to see demand (Group 3) Spillovers and linkages to other sectors (Group 4) Nontraditional effects (internships, servicelearning) (Group 5) Initiatives The possible and the reasonable Preparation Must Include Map of Area Gonzaga report should provide general outline of what

report should look like In addition, should prepare for Service-Learning Appreciation Day in late April Need visuals, etc. for event Week #4 SSR, Chapter 2 Evolving focus of planning models and evaluation Planning used to be entirely reactive Local example: GE decides to leave state, now what do we do? Too late to address problem in any way that is helpful in the near- to

medium-term Pages 56-> New focus of development planning: From No. of jobs to quality jobs (employment) From natural resource assets to quality environment (location) (Knowledge) from trained labor force to knowledge as an economic generator (Sectors) from individual sectors to new institutions Basis of policy:

From regional focus to more general focus (Bridgeport versus greater region (SMSA) Planning can be viewed as anti-market But, can act against negative economic trends to quicken adjustments Should not be used to actively work against the inevitable will fail SSR lists initiatives carried out by U.S. government Most are public/private initiative many have a regional focus, but some are nationwide Primarily through federal grant-making process

Biggest Failure of Planning May be its Reactive Nature (as noted) Development policies undertaken after major firm departs or major business failure Too late to head off major problems Authors differentiate between reactive and proactive planning (p. 61) Reactive usually does not work well

Development process (p. 63) Notes that organization of resources is starting point Regional Audit Resource inventory Natural resources Labor Force (Skill set) Location advantages (ports, rail link) Development projects should fit inventory

SSR also note that impediments to development should be inventoried Required Components (SSR, page 86) Business (capital), catalysts, infrastructure, Agency Concentric presentation is meant to illustrate development planning starting at the center and moving outward In this model, infrastructure is a necessary first step Assumes it is provided for by government, does not need to be

Catalysts represent actions that pull resources together to facilitate project (may be public or private) e.g. financing Skip to Case Study on Page 83 Cairns region of Australia Issues facing the region A growing regional trade imbalance Capital outflows (savings leaving region) Profits exiting region

Lack of corporate identity A decline in capital inflows (particularly foreign) Specifics Population: 250,000 State product Error in text (# way too low) Growth rate 6% Focus on tourism (environmental preservation) International/national economic related activity equal to 45% of output

Page 95 Structure of planning process and institutions May be unnecessarily complicated Focus on industry clusters most successful part of initiative Integration of various sectors of economy led to more rapid economic growth This is a model that Bridgeport might have been able to utilize years ago Tie Sikorsky into machine tool and resource industries in city to a greater degree Try to integrate civilian industries into structure those that use similar products

Also case study on Singapore read on your own Example 2 Failed Development Experiment: New London, Pfizer and Connecticut College Kelo v. New London (supreme court) Susette Kelo was owner of home in New London Pfizer (with extensive support from the president of Connecticut College) sought to acquire property to set up a campus in New London

State Supreme Court narrowly approved use of eminent domain to seize property supreme court eventually affirmed Issue: Was eminent domain meant for use by private developers? Approval for public projects long accepted Outcome Kelo lost case. City gave Pfizer millions of dollars in tax breaks to stay in New London Site was demolished, including the Little Pink House owned by Kelo (now the title of a book)

Shortly after the decision, Pfizer changes its mind and left (2009) eliminating 1400 jobs Result: gigantic empty lot that is now an eyesore Case led many state legislatures to pass new laws restricting the use of eminent domain Comparisons to SteelePointe in Bridgeport not Appropriate SteelePointe is abandoned industrial land If eminent domain was used at all, it was not opposed

City leaders hope that project succeeds and redevelops that part of city Returning to Semester Project (Group 1) Internal financials and employment Annual Budget of University Employment faculty and staff Where employees reside (not sure can get this) Student population and where they reside Survey: how often do students leave campus and where do they spend money

Tax offset from State provided to Fairfield (Group 2) Mapping out economic influences which businesses likely to see demand Inventory of restaurants, banks, markets, drug stores, gas stations, etc., including businesses that deliver to campus These should be mapped out, since (obviously) businesses closer to campus see more demand Must include expenditures by faculty, staff, administration also

Continued (Group 3) Spillovers/linkages to other sectors/land use Businesses (e.g. food service) that directly benefit from University Contractors (heating, cooling, etc.) Need list of businesses that University utilizes Linkages tend to be weak for academic institutions What businesses might thrive as a result of Fairfields presence In manufacturing, this is the machine tool businesses that exist to service a firm

e.g. Sikorsky Land preservation and open space what if the 120 ace campus was all houses? Continued (Group 4) Nontraditional effects (internships, service-learning) Survey departments and schools about internships Melissa Quans office can provide figures on service learning Also need to address volunteer work hours (e.g. Prospect House) And student organizations that do service in the community (COSO as source)

Of Equal Importance: Aspects of University made available to town residents Use of the library, the Quick Center, Public Events (at Bookstore) Continued (Group 5) Initiatives The possible and the reasonable Are they ways that the University can increase its positive impact on the community? As a nonprofit, this is a legitimate question Example: Utilization of local resources (nearby food)

This aspect of project will be part of brainstorming by entire class SSR Chapter 3 Tools Used in Examining Regional Development Tools for analyzing (measuring) economic development And, measuring impact of development policy Measure: Proportion of economic activity that is related to locality, versus part related to regions external to area

Assess regions performance relative to other regions Determine which industries are important to economic output in the region Location Quotient Measure of relative importance of an industry to a region LQ = Employment in Industry j in region i/Employment in Region i ___________________________________________________ Employment in industry j in country (or state)/total employment

Example: Construction employs 100 people in Stratford, where 12000 people work. Construction employs 200,000 people in CT, where 1.8 million people work LQ = (100/12000)/(200,000/1.8 million) = The higher the LQ, the more important the industry is to a region Example on page 109 of SSR: LQs for northern Virginia

Computer rental and leasing is far more important than security service (12.46 to 2.83) Changes in LQs provide a means of envisioning changes in a region (page 111) Shift-Share Analysis Skip the mathematical derivation Important part of concept Measures the changing importance of sectors in an economy

Indicates declining industries that may need attention, as well as new growing industries Indicator to planning officials about both opportunities and challenges (Share of sector in total output/total output) Change over time is important part Rest of chapter inappropriate for an introductory course Preparation for Midterm Exam

Core Versus Periphery Established approach to economic development on both regional and national level Core is usually a central city Periphery is the economic area around that city Can be suburban ring and then rural area Common patter that does not necessarily imply a development problem Diagram

Other Use Global Development Industrial countries are the core; developing nations the periphery In this model, the periphery is generally regarded as disadvantaged U.S. versus Latin American Nations Europe versus African Nations Leads to policy-based models of how periphery can be developed And discussion of how development criteria are established

Returning to Regional Models Although not necessary, core-periphery models do emphasize the inferior situation of the periphery Services (e.g. hospitals, large financial institutions, large stores) are in the core Services in the periphery may be limited May result in dependence Does not fit Connecticut situation very well Cities (Bridgeport) are not regarded as very good models of

development, although they do contain essential services More Appropriate would be Boston Large central city with every imaginable service, surrounded by successful suburbs Use of Core-Periphery Model Attention is on how to promote growth in periphery and how to ensure that essential services are available in periphery Recognizing that those that choose to live in rural areas are, by choice,

separating themselves from such services

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