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Work-In-Process. Investing in Metropolitan Economies. April 22, 2010. Why Metros?. Why Metros? Economic Geography and Place-Based Development. The Goal is Economic Growth. Goal is economic development - that is inclusive and sustainable . Metros are the means, not the ends. - PowerPoint PPT Presentation
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April 22, 2010
Investing in Metropolitan EconomiesInvesting in Metropolitan Economies
Work-In-ProcessWork-In-Process
Why Metros?Economic Geography and Place-Based Development Why Metros?Economic Geography and Place-Based Development
The Goal is Economic Growth
Goal is economic development - that is inclusive and sustainable. Metros are the means, not the ends
The Goal is Economic Growth
Economic Growth Flows from Market Activity
The outputs we care about – jobs, income, assets, sustainability – are primarily a function of the complex interaction of housing, labor, business and other market systems, enabled and shaped by government and civic sector activity
Goal is to improve performance of these systems
Why Metros?Economic Geography and Place-Based Development Why Metros?Economic Geography and Place-Based Development
The Goal is Economic Growth
Economic Growth Flows from Market Activity
Major Market Systems Operate at the Metro Level
System performance is function of interactions of people and firms in context of characteristics of place – “on the ground.” (Vertical and horizontal integration)
Key geography of many of these systems and interactions is metropolitan region. (Metro includes, but is more than sum of, its neighborhoods. Best neighborhood development deploys people and assets into metro economy, improving both.)
Indeed, one of main reasons for very existence of cities is the agglomeration benefits of concentrating economic activity – an effect of place on market performance.
Why Metros?Economic Geography and Place-Based Development Why Metros?Economic Geography and Place-Based Development
The Goal is Economic Growth
Economic Growth Flows from Market Activity
Major Market Systems Operate at the Metro Level
Improving Metro Economic Performance Entails Customized Analysis and Deliberate Activity
System and environmental characteristics, opportunities and challenges “on the ground” vary by place.
Particularly in the knowledge economy, increasing returns and imperfect competition are giving rise to specialization and divergence. It is more important than ever to be deliberate and strategic, as the economy no longer “takes care of itself.”
Why Metros?Economic Geography and Place-Based Development Why Metros?Economic Geography and Place-Based Development
The Goal is Economic Growth
Economic Growth Flows from Market Activity
Major Market Systems Operate at the Metro Level
Improving Metro Economic Performance Entails Customized Analysis and Deliberate Activity
Economic growth entails strengthening metro economies, and that requires deliberate, ground-up, tailored activity.
Why Metros?Economic Geography and Place-Based Development Why Metros?Economic Geography and Place-Based Development
A Framework for Investing in Metro EconomiesA Framework for Investing in Metro Economies• Purpose: shared understanding of how regional economies
work – a “theory of change” -- enables us to:− Focus on what matters − Understand how it causes economic growth− Determine how to improve performance
• There’s no one right answer… but there are a lot ofwrong answers
• Purpose: shared understanding of how regional economies work – a “theory of change” -- enables us to:− Focus on what matters − Understand how it causes economic growth− Determine how to improve performance
• There’s no one right answer… but there are a lot ofwrong answers
How Metro Economies GrowHow Metro Economies Grow
• Metro economy = total value of goods and services produced in the region
• Growth is inherently business sector growth (number, size and profitability of firms)
• Business sector grows through firm growth and location decisions (retention and attraction)
• Firm growth and location depend upon increases in efficiency and productivity (of firm and system, including product innovation)
• Metro economy = total value of goods and services produced in the region
• Growth is inherently business sector growth (number, size and profitability of firms)
• Business sector grows through firm growth and location decisions (retention and attraction)
• Firm growth and location depend upon increases in efficiency and productivity (of firm and system, including product innovation)
Core Question: What attributes of the region increase efficiency and productivity, leading to business sector growth?
Micro-FoundationsMicro-FoundationsMicro-FoundationsMicro-Foundations
What is it About Place that Affects Economic Performance? What is it About Place that Affects Economic Performance? “Cities exist to eliminate transport costs for people, goods and ideas” (Glaeser)
• Urbanization and Localization Economies: general and industry-specific benefits of concentration as workers and firms co-locate because of spillovers, synergies, shared labor and job pools, backward and forward linkages among firms, etc. – generating increased efficiency and productivity through flow of ideas and technologies, enhancements to human capital, economies of scale, reduced transaction and transport costs, and so forth. (Marshall, Krugman)
• New Growth Theory: location is becoming more important, and with different benefits, in the knowledge economy, as metros become increasingly centers of idea creation and transmission (through technology, human capital externalities, intellectual spillovers). Increasing returns to knowledge and imperfect competition lead to metro specialization and divergence. (Romer, Lucas)
• Institutional Economics: growth, and particularly innovation, take place in the context of an institutional infrastructure – research, professional and learning networks; universities and civic/business organizations; quasi- and governmental organizations and regulation – which can hamper or accelerate all of the other benefits of concentration. (Coase, Atkinson)
“Cities exist to eliminate transport costs for people, goods and ideas” (Glaeser)
• Urbanization and Localization Economies: general and industry-specific benefits of concentration as workers and firms co-locate because of spillovers, synergies, shared labor and job pools, backward and forward linkages among firms, etc. – generating increased efficiency and productivity through flow of ideas and technologies, enhancements to human capital, economies of scale, reduced transaction and transport costs, and so forth. (Marshall, Krugman)
• New Growth Theory: location is becoming more important, and with different benefits, in the knowledge economy, as metros become increasingly centers of idea creation and transmission (through technology, human capital externalities, intellectual spillovers). Increasing returns to knowledge and imperfect competition lead to metro specialization and divergence. (Romer, Lucas)
• Institutional Economics: growth, and particularly innovation, take place in the context of an institutional infrastructure – research, professional and learning networks; universities and civic/business organizations; quasi- and governmental organizations and regulation – which can hamper or accelerate all of the other benefits of concentration. (Coase, Atkinson)
Productivity and efficiency depend upon concentrations, interactions and synergies between economic activities Key Q:
Where are the leverage points to improve system performance?
Six Key Leverage Points Take Us from Theory to Practice Six Key Leverage Points Take Us from Theory to Practice • Enhance Regional Concentrations (and their performance):
Industries, Occupations and Functions• Deploy High Human Capital Aligned with Job Pools• Develop Innovation Enabling Infrastructure• Increase Spatial Efficiency
• Create Effective Public & Civic Culture & Institutions
• Develop and Deploy Information Resources
• Enhance Regional Concentrations (and their performance): Industries, Occupations and Functions
• Deploy High Human Capital Aligned with Job Pools• Develop Innovation Enabling Infrastructure• Increase Spatial Efficiency
• Create Effective Public & Civic Culture & Institutions
• Develop and Deploy Information Resources
These overlap, and themselves interact. This is work-in-process! Anticipate expanding and refining, especially in practice.
Enhance Regional Concentrations: Industries, Occupations and FunctionsEnhance Regional Concentrations: Industries, Occupations and Functions• What is it?
This leverage point has to do with “clustering,” recognizing that what is clustering may be shifting -- toward occupations and functions -- and the whole notion may need to be broadened, brought to ground, and complemented with other production-side strategies. It focuses on the optimal interaction between production components of an economy – the optimal mix and scale of industries, occupations, functions; multiple specializations; etc. Cultivating benefits of concentration requires understanding nuances of what and how specific types of concentrations create efficiencies and enhance productivity in your region.
• Aspects to consider include:− Current concentrations− High-growth potential areas− Geography of concentrations− Optimal mix and scale of industries, occupations, functions− What factors (locational, institutional, others) contribute to efficiency/productivity benefits
gained from concentration
• Strategies might include:− Provide co-location opportunities (e.g., Research Triangle)− Offer co-location incentives− Enhance access to capital for targeted concentrations− Strengthen institutional and network infrastructure− Strengthen “inputs” to concentration – from training/education to venture capital− Careful about limits of government in picking or causing genuine “clustering”!
Leverage Point 1Leverage Point 1Leverage Point 1Leverage Point 1
Deploy High Human Capital Alignedwith Job PoolsDeploy High Human Capital Alignedwith Job Pools• What is it?
This leverage point addresses human capital in the context of economic performance: the goal is not just human capital, but linked, mutually reinforcing, human capital and job pools. Pools of workers and jobs/firms attract each other. Not just quality, but deployment, are key to productivity and efficiency gains. Entails a two-fold, iterative process:
− Growing supply of skilled workers to meet employer demands− Growing demand for skilled workers by cultivating appropriate jobs
• Aspects to consider include:− Concentrations and growth prospects (both skills and occupations)− Existing skills/education levels – obstacles and opportunities− Quality of education/training system− Attraction/retention factors
• Strategies might include:− Increase demand-side focus of workforce development− Increase access, reduce transaction costs to increase labor market efficiency and inclusiveness− Links to occupational concentration strategies (Leverage Point 1)− Production, attraction, retention strategies
Leverage Point 2Leverage Point 2Leverage Point 2Leverage Point 2
Develop Innovation Enabling InfrastructureDevelop Innovation Enabling Infrastructure• What is it?*
Innovation inherently drives increasing productivity and efficiency, and is the source of all long-term growth. Used here broadly to encompass movement along various stages from idea to product to commercialization to entrepreneurship to “gazelles” (high growth firms). Institutional infrastructure and inputs – from R&D funding to open, risk-tolerant business culture – critically enables innovation.
• Aspects to consider include:− Cluster formation and dynamics− Public sector enablers/constraints− Nature of supporting institutions and networks− Flow of R&D and early-stage business funding− Rate/pattern of commercialization− Firm starts, growth, trajectories
• Strategies might include:− Build regional R&D capacity (education, facilities, funding)− Foster entrepreneurship & commercialization of knowledge− Institutional development: facilitate opportunities for interdisciplinary cross-
fertilization− Cluster formation, especially high human capital occupational concentrations
(Leverage Points 1 and 2)
Leverage Point 3Leverage Point 3Leverage Point 3Leverage Point 3
*“…new products, new services, new technologies, new ways of organizing work, *“…new products, new services, new technologies, new ways of organizing work, and new business models….” (Brookings and new business models….” (Brookings Metro PolicyMetro Policy))
Increase Spatial EfficiencyIncrease Spatial Efficiency• What is it?
The location of firms and workers, producers, suppliers and consumers within the region determines transportation costs for people and businesses, and influences agglomeration benefits (such as shared inputs and knowledge spillovers). Generally, to increase efficiency and productivity of the metro economy, we want to:
− Minimize transportation costs− Reduce congestion− Maximize agglomeration benefits− Avoid segregation and concentration of poverty
• Aspects to consider include:− Public policies re: land use/zoning, infrastructure, etc.− Degree of housing-jobs mismatch− Access to transit− Spatial concentrations of firms, occupations, functions, etc.
• Strategies might include:− Transit-oriented and mixed-use/mixed-income development− Affordable housing programs (inclusionary zoning, etc.)− Fostering business co-location
Leverage Point 4Leverage Point 4Leverage Point 4Leverage Point 4
Create Effective Public & Civic Culture & InstitutionsCreate Effective Public & Civic Culture & Institutions• What is it?
Government and civic sector activities hinder or enhance the productivity and efficiency of the economic systems – attracting entrepreneurs, enabling markets, lowering transaction costs, increasing deployment of assets, etc. A culture of trust and collaboration, as well as institutional flexibility and adaptability, are increasingly important (including particularly to leverage points 1 and 3).
• Aspects to consider include:− Degree of horizontal and vertical fragmentation− Areas and mechanisms for inter-jurisdictional coordination− Transparency, openness, responsiveness, engagement of citizens, private and civic
sectors− Private and Civic sector formal and informal institutional infrastructure
• Strategies might include:− Consolidation− Revenue sharing− Civic engagement (program specific)− E-government− Fast-tracking− Special purpose entities− Industry or occupation specific informal networks (e.g. “First Tuesday” )− Incenting consolidation and cross-sector collaboration in civic sector
Leverage Point 5Leverage Point 5Leverage Point 5Leverage Point 5
Develop and Deploy Information ResourcesDevelop and Deploy Information Resources• What is it?
Rich information resources and networks increase market efficiencies by reducing finding, measurement and other transaction costs; facilitate knowledge spillovers and innovation; and enable continued business planning, monitoring and refinement.
• Aspects to consider include:− Collection, accessibility, dissemination of relevant info− Development and provision of analytic tools (not just data: answers)− Specific market inefficiencies, barriers, opportunities
• Strategies might include:− Data warehouse− Specific market driving information resources and tools− Cluster or strategy specific on-going shared info/analytics
Leverage Point 6Leverage Point 6Leverage Point 6Leverage Point 6
Why “Metropolitan Business Planning”? Why “Metropolitan Business Planning”?
The steps to analyzing and improving a regional economy lend themselves to the proven discipline of business planning.
ECONOMIC DEVELOPMENT PLANNING TRADITIONAL BUSINESS PLANNING
Vision for the Regional Economy Business Mission & Vision
Status of Economy: Assets,Opportunities, Challenges Market Analysis
Goal-Setting & Strategy Identification Analysis of Strategic Alternatives & Risks
Identification of Policies, Programs, Products & Interventions Development of Products & Services
Operational Planning for Implementation Operational & Management Planning
Identification of Funding Needsand Sources Forecasting & Financial Planning
Definition of Outcome Measures & Targets Target-Setting & Performance Tracking
Elements of the Business PlanElements of the Business PlanElements of the Business PlanElements of the Business Plan
MEASURABLE OUTPUTS/IMPACTS
Wage Growth, Reduction in Unemployment,Reduction in CO2 Emissions,Neighborhood Revitalization
MISSION/VISIONCompetitiveness
(Wages, GRP, Innovation)Sustainability
(VMT, Energy Efficiency)Inclusion
(Participation in Employment, Business and Market Growth)
PRODUCTS AND INTERVENTIONS
WIRED Program,Regional Inclusionary Zoning,
Green Impact Zones,
INSTITUTIONAL AND FINANCIAL IMPLICATIONS
• Regional Information Infrastructure• Regional Coordination• Specific Institutions/Implementation
Capacity• Financials Investment “Prospectus”
Tied to Outcome Measures
MARKET SCANStatus, Systems, Dynamics
(Spatial efficiency, Human capital trends matched to
business growth,Business clusters/performance….)
GOALS/STRATEGIESTransit-Oriented Development
Coordinated Workforce and Occupational Clusters
Inner-City Retail Development
Metro Development Baseline/Overview (MDBO)
Mission/Vision↓
Market Scan/Environmental Analysis↓
Goals↓
Strategies↓
Detailed Development Initiative (DDI)
Products, Policies, Programs, Interventions
↓
Organizational & Operational Implications
↓
Financial Implications↓
Performance Metrics
Pilot MBPs Will Lay the GroundworkPilot MBPs Will Lay the Groundwork
FutureDDI
Metropolitan Investment Prospectus
FutureDDI
Metro Development Baseline/Overview (MDBO)
Mission/Vision: Sustainable communities…dense nodes…efficiently linked people & businesses ↓
Market Scan Results: Emerging specialization in alternative energy businesses and occupations↓
Goals: Increase number of establishments, employment and total payroll in the alternative energy field↓
Strategies: (a) Co-location incentives; (b) Targeted, demand-driven workforce devel.; (c) Links to students↓
Detailed Development Initiative (DDI)
Intervention: Cluster-Focused Industrial Park that:•Facilitates business co-location•Houses on-site “training academy” that
− Provides skill devel. for key occs./functions− Utilizes demand-driven curriculum− Offers internship, co-op & mentorship opportunities to local students
↓
Operational Plan↓
Financial Sources & Uses↓
Metrics: new jobs, new cos., $payroll, $GMP, etc.
What Might a Pilot MBP Look Like?What Might a Pilot MBP Look Like?
Metropolitan Investment Prospectus
Implications for Federal PolicyImplications for Federal Policy• The federal government should strategically invest in
regional prosperity as a priority for national economic growth.
• The federal government should incent and support comprehensive, integrated regional business planning, as it will enable more effective and efficient federal investment.
• Since regional performance depends upon local, specialized system interactions, the federal response needs to be cross-program, flexible and performance-driven.
• The federal government should strategically invest in regional prosperity as a priority for national economic growth.
• The federal government should incent and support comprehensive, integrated regional business planning, as it will enable more effective and efficient federal investment.
• Since regional performance depends upon local, specialized system interactions, the federal response needs to be cross-program, flexible and performance-driven.
Federal policy should be driven ground-up by regional development plans (reversing the current dynamic).
CLEVELAND Initial Content (illustrative, from pre-existing work)
Mission/Vision
• “Northeast Ohio is a diverse, united region made up of individuals fully engaged in creating a vibrant regional economy home to growing, innovative employers, connected core communities and valued natural spaces. All residents participate fully in educational and economic opportunities and engaged citizens promote collaborative local governments that support sustainable growth.”
• 6 core cultural principles• 4 future characteristics
Market Scan
Dashboard of Economic Indicators:• 4 top-line economic growth measures – % change in employment, income, productivity and output• 9 indicators: (1) Skilled Workforce and R&D , (2) Legacy of Place, (3) Urban Assimilation, (4) Racial Inclusion
and Income Equality, (5) Locational Amenities, (6) Technology Commercialization, (7) Urban/Metro Structure, (8) Individual Entrepreneurship, (9) Business Dynamics
• 36 supporting variables arrayed under the 9 indicators
Goals
• Top-level goals:Per capita income > national averageJob growth > national averageCore city poverty < 20%• Area-specific goals and quantitative targets re: Business Growth, Talent Development, Racial and Economic
Inclusion, Government Collaboration and Efficiency
Strategies
• Entrepreneurship: maximize available capital and provide needed consulting/services• Innovation/Research: attract more state $ in key industries, align efforts re: federal R&D/commercialization $,
attract high-growth cos., assist transition of existing cos.• Inclusion: network to support sales growth in minority businesses• Talent Development: align stakeholders to increase attainment and create life-long learning culture• Government: educate, engage and empower citizens to advance key initiatives
Detailed Development Initiative
Integrate and increase flexibility of a variety of existing manufacturing extension, Small Business Administration, workforce and other programs to assist a growing portfolio of high-potential but challenged manufacturing companies and their employees transition into high-technology/advanced manufacturing clusters that show strong growth potential
April 22, 2010
Investing in Metropolitan EconomiesInvesting in Metropolitan Economies
Work-In-ProcessWork-In-Process
Current Economy’s Meta-Drivers AlsoShape Strategic InterventionsCurrent Economy’s Meta-Drivers AlsoShape Strategic Interventions•Innovation-led •Export-oriented•Low-carbon •Opportunity-rich
•Innovation-led •Export-oriented•Low-carbon •Opportunity-rich
Huh???
What?!!
Eureka!
Levers / Interventions
Strategies & Implementation
Prosperity
Export-oriented Low-carbon Innovation-driven Opportunity richMetro-led
Fundamental Drivers of ProsperityInnovation Infrastructure Human Capital Quality Places
Governance
Developand DeployInformationResources
DevelopInnovation-
EnablingInfrastructure
Create EffectivePublic & Civic
Culture & Institutions
DeployHuman CapitalAligned with
Job Pools
EnhanceRegional
Concentrations
Increase Spatial
Efficiency
Key Systems (Market processes – housing, labor, etc.; production dynamics – clusters, value chains, etc.; innovation dynamics - knowledge creation, networks, commercialization, etc.)
Local (Regional) Enabling Environment(Government regulation, tax and public goods, including
particularly infrastructure and education; civic institutions; qualities of place, including the natural environment; etc.)
Local (Regional) Enabling Environment(Government regulation, tax and public goods, including
particularly infrastructure and education; civic institutions; qualities of place, including the natural environment; etc.)
Inputs to Production(Human capital; real estate; capital; natural and knowledge resources; etc.)
Economic Outputs(Businesses – gross regional product, profits; households – wages, other income, etc.)
Macro/Global Context & TrendsMacro/Global Context & Trends
What Drives Inclusive and SustainableEconomic Growth?What Drives Inclusive and SustainableEconomic Growth?