Local Economic Development Theories PAD 5805: Lecture 1

What is ED? Three essential elements: Establishes a minimum standard of living for all and increases the standard over time. Reduces inequality. Promotes and encourages sustainable resource use and production.

Challenges and Opportunities The Nature of New Economy Manufacturing to Service/ Information Globalization Mobility of capital, labor Faster pace Outmoding of products, skills Disasters Earthquakes, hurricanes, flooding, etc. Human Resources Skills capacity

Challenges and Opportunities Suburbanization Inner city/ ghettoization/ gentrification Crime control Safety Global Warming Climate change at local level Housing Crisis Rising/ Falling home prices

ED Theories Neoclassical Theory Economic base theory Productivity = f (capital, land, labor) Technology = constant Regional equilibrium Government as a referee (enforcing laws) and providing national security Economic base theory Exports from local area Competitive advantage Regional specialization

ED Theories Product Cycle theory Location theories Products have life cycles of innovation and diffusion process Emphasis on creation of new products for ED Location theories Classical: L, L, L!!! Minimize transport costs Resources and markets Forward/ backward linkages Localization vs agglomeration economies Growth poles; forward/ backward linkages

ED Theories Central place Social theory Specialized urban center (downtown/ Central Business District, CBD); Satellite developments Monocentric and polycenric cities Social theory Social justice Poverty Regional disequilibria Government as a protector, redistributor

ED Theories Attraction Models New Markets model Place matters Amenities matter (climate, natural attractions) Importance of third places New Markets model People matter—consumer base; human resources Asset based economic development Local natural resources

Question for thought Do the theories adequately describe local economic development? Think in terms of Jane Jacobs’s article