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MIT 11 945 - Lecture Notes

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11.945 Springfield Studio Session 3 Notes Lecturer: Karl Seidman Economic Development Theories: Neighborhoods as Economic Units Overview To provide a theoretical foundation for our work, this class will review literature on regions as economic units, the relationship between regional and neighborhood economic development and theories that seek to explain why and how economies develop. Introduction This class should be more of a discussion/exploration than a full lecture. The issue of what is regional economic development is and what are the forces that drive it is a huge subject. We are not going to do the issue justice here, but it is valuable to think about some of these theories and how they might be helpful to us as we try to understand what it means to do neighborhood economic development. It is also important to think about how these ideas might help us accomplish some of the goals in Springfield more specifically. One of the advantages we are bringing to the neighborhood through this course is the opportunity to consider more theoretical content. They have good ideas that are rooted to the neighborhood context and a theoretical perspective can help them develop those thoughts. We want to get to the core ideas of these theories and think about what they imply about economic development strategies. Ultimately we will come back to these issues again. Slides I. Geography of Economic Development (Larry Ledebur’s book The New Regional Economies) a. The book is a polemic against national economic development policy. b. Current economists’ thinking is that metropolitan areas are the primary basis for economic regions. i. 95% of economic activity is organized around metropolitan areas, typically around a central city (though its role is getting smaller). ii. Looking at economic performance, metropolitan areas differ, i.e. they are distinct economic units. iii. Whatever we do in the North End, Springfield is in the context of this metropolitan economy. II. Springfield, MA Economic Geography a. Massachusetts Metropolitan Area Map i. Map of metro areas in MA.ii. Different federal bureaucracies define them differently. This once comes out of NECMA. iii. The Springfield Metro Area is geographically the second-largest in the state. iv. Springfield is the central city of a large metropolitan area that extends far. b. Map of Labor Market Areas i. Focused on commuting patterns, primary metropolitan areas where residents get jobs. ii. Almost the entire state is broken into labor market areas. iii. The Springfield metropolitan area and labor market areas are pretty much the same. c. Census Map i. Springfield is at the southern end of the region. ii. The Connecticut River Valley is the defining geographic feature of area. 1. The first major industry that developed was firearms, and you see that all along the River Valley. 2. That river as a transportation corridor has been replaced by I-91, which is the major regional transportation route. iii. Even though this is a large area, most of the economic activity is centered in Springfield and surrounding areas. 1. The only other centers are Amherst – center of UMass, educational institutions – and Northampton, which has become a regional destination around entertainment, dining, and has sort of displaced Springfield as the place to go. III. Employment a. Springfield had 254,000 jobs in 2004. b. The largest sectors are Health Care, Education (UMass is probably included), Retail, and Manufacturing. IV. Major Economic Theories: a. Economic Base Theory i. 2 Major Ideas: 1. That neighborhoods have “export” (base) industry is an underlying assumption of many economic development practitioners. 2. The Multiplier Process: a. Income flows through and supports economic development in the region through supplier relationships; b. People in local industries are earning/spending income that can either be invested back into the local economy or go outside of it.ii. Is Economic Base Theory relevant to thinking about the North End? 1. Depends on the base industry and the demand for that product. Is there an external market in the North End? If people can sell products to people outside the North End, that will bring people into the community, 2. What is the neighborhood’s competitive position? iii. In the way the neighborhood is thinking about economic development, how much are they integrating economic base theory into their thinking? 1. They are thinking that because there is so much flow of people at the edge of the neighborhood, there is an opportunity to capture spending through tourism. They want to become a destination that attracts people into the neighborhood. a. These are non-basic activities, however, from the regional point of view. 2. How does the North End fit into the regional multiplier process? a. That will probably be a bigger set of economic issues for the neighborhood. b. Is the neighborhood capturing as much of the multiplier impact from its own residents as possible? c. You do have a large institution in Bay State with components that are export-oriented. d. It is worth exploring what are the major base-industries in and around the neighborhood in which the residents could participate as suppliers. b. Regional Growth Theory i. This theory is much more supply-side oriented. It emphasizes thinking about growth being driven by the nascent inequality of regional resources. ii. Major issues: 1. What are the quality and productivity of regional assets? a. Improving the quality and productivity of the labor force. b. Improving access of the labor force to labor markets. 2. Regional spillover and externalities: if a region is successful in becoming a major center for some industry, it will get increasing returns to scale, able to expand, increase productivity to get sustainable competitive advantage:a. Develop a specialized workforce b. Exchange of knowledge among workers, owners, l c. Local institutions develop to support the industry iii. Benefiting from base industries: 1. Locate them in the neighborhood 2. Ensure residents have access to employment opportunities in regionally located industries. iv. Relevance to Springfield, MA: 1. Massachusetts is the only state that lost population in the last census; 2. The growth in labor was entirely due to immigration, so 3. There are labor force constraints. 4. Human development should be more focused on the


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MIT 11 945 - Lecture Notes

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