GEO 4554 Regional Development

Chapter 2 and more.

Topics
Definitions:
What is Economic Growth DEVELOPMENT? What is Regional Economic Development?

Neoclassical Theory Comparative>Competitive>Collaborative Advantage SWOT Analysis Cumulative Causation Economic Base Analysis

Regional Economic Development RED

Definitions from Stimson et al. TEXTBOOK (pp. 5-7) . . .

Process of RED Analysis Textbook: Fig. 1.6

Neoclassical Economics
Basic Model of Economic Growth

Q = f (K, L)
OUTPUT/Quantity is a function of INPUT/Capital & Labor

National Income Equation

Y=C+I+G+XM Y= National Income C = Consumption I=Investment G = Govt Spending X = Exports M = Imports

Human and Social Indicators

Human Capital
The quality of a regions human resource base is a major inducement to industry

See Tables 2.1 & 2.2

Discussion
What is Capital? What is Labor? Other INPUTS in achieving Economic Growth:
T/Technology E/Entrepreneurship I/Infrastructure Others?

Substitution of Labor. Industrialized economies. Substitution of Capital. Non-industrial economies.

BUT:
Economic GROWTH is NOT the same as Economic DEVELOPMENT although Economic Growth may be a necessary condition of Development

Income Differences within Countries

Wealthiest 10% of countrys population Poorest 20% of countrys population
Explanation: The wealthiest 10% of Brazils population receives nearly half (46.2%) of national income.

USA

Income Distribution: the Gini Curve

http://www.squarecirclez.com/blog/thegini-coefficient-of-wealth-distribution/4187

GDP Distributions in Economic Sectors for Various Countries

Geography & Development

Geographers look at many FACETS of Development: Natural Resources Cultural Attitudes Spatial Patterns of Development Distributions, Spatial Interaction
Population distribution Resource distribution

What is Development
Development is the process in which the principal objective is to improve the quality of peoples lives. Expansion: A process by which the political, social, economic, and environmental conditions and well-being of the people living in a region/state/country are improved.

What is Economic Growth?

Annual (usually) or sustained increases in output
Products Income Revenues Productivity

Economic Growth is NOT the same as Socioeconomic Development

Economic Growth

Socioeconomic Development

However, in most countries today economic growth is a necessary condition of Development.

Sustainable Development
Sustainability:
Management of production systems and/or extractive resources in order to satisfy current needs of society without compromising the ability to satisfy the needs of future generations.

Measuring Economic Growth and Development Development Indicators

Development Indicators
Human Development Index (HDI) http://hdr.undp.org/en/statistics/
Per capita GDP Life expectancy Literacy, Mean years in formal schools

PQLI (Physical Quality of Life Index)

measures outputs or results includes access to natural & built resources such as electricity, housing, other facilities

Recall: Measurements of Economic Growth

Gross Domestic Product (GDP)*/Gross National Product (GNP)
*Total value of goods and services produced within the political boundaries of a country, measured annually.

Per Capita GDP

GDP/Population of a Country

HDI PQLI

Regional Development: What it is

Regional/Local Development = f(natural resources, labor, capital, investment, entrepreneurship, technology, size of the place, export market, international economy, local institutional capacity, national/local/state governments spending; development support policies

Chapter 2: RED Evolution of Strategies

1950-1960s: Public/Private collaboration 1970s: Urban Renewal. Planned development. Emergence of globalization 1980s: Focused, strategic planning. Formal models of growth & development. 1990s: Sustainable development. Current: Sustainable, globalization,
Think global act local.

Regional Development
Strategic Planning

Best Practices for Regional Development Planning

1. Analyze Performance & Competitiveness of the Regional Economy 2. Establish Benchmarks for Evaluation 3. Establish Strategy for Regional Change & Development 4. Implement Strategies (Industry Clusters, Core Competencies 5. Monitor Regional Performance

The RED Movement: Evolution of Strategy

RED planning from the 1950s to now: changes in objectives & approaches Objectives of Economic Development: Europe(OECD), U.S. Public/Private Sector Cooperation Planning process: Flow Chart (p. 63)

Figure 2.1. Local Development process Flow Chart

Progression of Economic Growth Approaches

Development is Place-Specific
The process for which the main objective is to improve the quality of peoples lives. Goals of Development
Historical National Cultural Regional

What are Americas GOALs for Quality of Life. What are YOUR goals? What is a Good Life for You?

Determinants of National Growth

Factors that Give Nations a Competitive Advantage

Determinants of National/Regional Advantage: Porters Factor Diamond

Firm Strategy

Factor Conditions

Demand Conditions

Supporting Industries

Determinants of National/Regional Competitive Advantage

1. Factor conditions: production factors, skilled labor, infrastructure, technology 2. Demand conditions: home demand for product or service. 3. Supporting industries: linkages 4. Firm strategy, economic structure: government regulations,business formation and organization, management

Determinants of Regional Competitive Advantage: Gainesville/Alachua 1. Factor conditions: production factors, skilled labor, infrastructure, technology
Questions to Consider: What are the factor conditions that give Gainesville/Alachua County a comparative advantage over other counties in Florida and other regions in attracting businesses. What were some disadvantages faced by Gainesville?

Determinants of Regional Competitive Advantage: Gainesville/Alachua 2. Demand conditions: home demand for product or service.
Questions to Consider: Approximately, what proportion of the products and services produced in Gainesville/Alachua Countys economy would you say is consumed by local residents? Which are the major employers in the Gainesville Area? What is the socioeconomic profile of the Gainesville area population?
Education, income, ethnicity, age groups. http://www.cityofgainesville.org/

Determinants of Regional Competitive Advantage: Gainesville/Alachua 3. Supporting industries: linkages

Questions to Consider: What are the major types of industries in the economic profile of Gainesville/Alachua? What businesses are linked together as producer/consumers for other businesses in the Gainesville area?

http://www.eflorida.com/floridasregions/
Is there out-sourcing of economic activities?

Determinants of Regional Competitive Advantage of Gainesville/Alachua Cty 4. Firm strategy, structure: government regulations,business formation and organization, management
Questions to Consider: What is the role of the local governments in creating a probusiness climate? What is the role of the University of Florida? What policies and strategies were instituted to turn the local economy around? What is the role of other institutions (political, financial, cultural) in supporting economic development in GNV? http://www.eflorida.com/

Variations in Competitive Factors Skews the Shape of Diamond

Production Factors
Need More Skilled Labor or Technology

Local Demand
Need to Increase Local Consumption

Supporting Industries
Weak Sector Linkages

Economic Structure
Unfavorable tax/ regulatory structure

Firm Strategy Production Factors Demand Support Industries

Improving Competitive Advantage by Addressing Diamond Skewedness

Production Factors Local Demand Supporting Industries Strategy, Structure

Need Skilled Need to Increase Weak Sectoral Unfavorable tax/ Labor or Local Consumption Linkages regulatory structure Technology Dev. Recommendations Recommendations Recommendations Recommendations

& Now : Collaborative Advantage

Multi-Sector Integrated Strategic PLANNING Complementarity Cooperation Joint Ventures Regional Integration

From Comparative to Competitive to Collaborative Advantage

Cumulative Causation*
Path dependency: Once it gets started Impact of history
The Good: existing infrastructure, links, labor skills The not- so-Good: organizational or technological rigidity

*The Agglomeration Process

Cumulative Causation Model of Economic Growth

Strategic Planning: SWOT

Strengths Weaknesses Opportunities Threats

Local SWOT Analysis

Demographics of population HH Income & Municipal tax base Major businesses & employment by industry Education resource Public services Housing & living conditions
QUALITY OF LIFE

S.W.O.T Analysis Strengths Opportunities Weaknesses Threats

Strategies that Address SWOT Analysis Findings

Strengths
Opportunities
S-O Strategies How to pursue opportunities that amplify the strengths S-T Strategies Identify ways that strengths can be used to reduce vulnerability to threats

Weaknesses
W-O Strategies
How to overcome weaknesses to pursue opportunities.

Threats

W-T Strategies Establish a defensive plan to counter weaknesses that make it susceptible to external threats

http://www.quickmba.com/strategy/swot/

RED Planning: Miami Dade

Phase I: Demographic & Economic Profile Phase II: Economic Organization, Quality of Life, Infrastructure/Regulation, Education, Local Business Structure, Health Care Services, Tourism, Marketing Strategy Phase III: Review Phase II for Planning & Policy Development of institutions & organizations Phase IV: Implementation & Monitoring
http://www.beaconcouncil.com/web/

Alachua County Profile

http://www.eflorida.com/profiles/CountyRepo rt.asp?CountyID=1&Display=all

Population Demographics: Gainesville, FL

http://www.cityrating.com/citystats.asp?city=G ainesville&state=FL
http://www.gainesville.com/article/20080712/N EWS/807120321

Regional Measurement Tools

Economic Base Analysis Shift-Share Analysis

The Economic Base Model (Multipliers)

Types of Employment Sectors 1. Basic Sectors (BE)
Employment sectors that add wealth and bring income into a region/area.

2. NonBasic Sectors (NBE)

Employment sectors that support the basic sectors.

Basic & NonBasic Sectors

Basic Region-forming Export oriented E.g. manufacturing, value-added production; Outside use of service functions. NonBasic* Region-serving Internal support E.g. administrative, utilities, govt
*At one time thought to be only the Service Sectors.

Factors in Economic Base Analysis

Basic employment (BE) brings in income and revenues exports products/services outside Nonbasic employment (NBE) provides support for BE Linkages company/sector relationships backward: company purchases inputs forward: company sells output

Location Quotient Analysis (LQA)

The objective of the LQ analysis is to find out which industries in a region are its export or basic (base) industries.

LQi = (ei/e) / (Ei/E) ei= regional employment in specific sector e= total employment in region Ei = National employment in specific sector E = total National employment
If the LQi > 1, the local share of employment in that industry exceeds the larger economy's share.

Economic Base Analysis: Employment Multipliers

Total Employment is composed of Basic Employment and NonBasic Employment
(Find Basic Employment using Location Quotient calculations)
TE = BE + NBE

The multiplier effect of BE is determined by the relationship of TE:BE (TE/BE)

m = TE/BE

Substitutions:
m = BE+/BE

Location Quotient is a Percent

LQi = (ei/e) / (Ei/E) (%) / ( %) ei= 1,000/ 10,000 e= 10,000 / 500,000 10% / 2% LQi = 5
We are comparing:
industry regional employment total regional employment Industry National Employment Total National Employment

vs.

Industry Employment Sources

County Business Patterns http://censtats.census.gov/cbpnaic/cbpnaic.shtml Economic Census: U.S.A. Totals by Industry (2002) http://www.census.gov/econ/census02/data/us/US000.HTM U.S. A. Totals by Industry (2007) http://factfinder.census.gov/servlet/MetadataBrowserServlet?type=dataset&id= EC0700A1&_lang=en For States: Economic census >>> 2002 Reports by State (Drill Down & PDF) Enter state>>Go>> >>Other business data for Florida>>>2001 Statistics of U.S. Businesses (by size) U.S, states, metro areas Click on More>>Scroll down to Florida - All industries by Sector Bureau of Labor Statistics http://www.bls.gov/