Inside the Great Recession: University Products and Regional Economic Development

This article investigates the role of universities in the economic development of American metropolitan regions during the Great Recession (2007–2009) and the growth period prior to it (2001–2007). It develops a supply‐side conceptual framework on the role of universities in technology‐led regional economic development. Specifically, this framework highlights three “university products” that can be explicitly defined and measured: educational services, business services, and new knowledge or technology. The empirical test of this conceptual framework finds that the presence of universities is positively associated with regional economic performance during the Great Recession, mainly via the educational services product. Findings indicate that regions with a higher level of university science, technology, engineering, and mathematics graduates are more resilient to the economic recession.     

Fiscal Decentralization and Economic Growth in Central and Eastern Europe

The majority of the literature on fiscal decentralization has tended to stress that the greater capacity of decentralized governments to tailor policies to local preferences and to be innovative in the provision of policies and public services, the greater the potential for economic efficiency and growth. There is, however, little empirical evidence to substantiate this claim. In this paper we examine, using a panel data approach with dynamic effects, the relationship between the level of fiscal decentralization and economic growth rates across 16 Central and Eastern European countries over the 1990–2004 period. Our findings suggest that, contrary to the majority view, there is a significant negative relationship between two out of three fiscal decentralization indicators included in the analysis and economic growth. However, the use of different time lags allows us to nuance this negative view and show that long‐term effects vary depending on the type of decentralization undertaken in each of the countries considered. While expenditure at and transfers to sub‐national tiers of government are negatively correlated with economic growth, taxes assigned at the sub‐national level evolve from having a significantly negative to a significantly positive correlation with the national growth rate. This supports the view that sub‐national governments with their own revenue source respond better to local demands and promote greater economic efficiency     

Sources of Output Change in the U.S. Economy

Output changes in the U.S. economy from 1972 to 1977 are analyzed using a 477-sector input-output framework. The empirical model is based on benchmark data from the U.S. Bureau of Economic Analysis. Commodity output changes are attributed to technical change, import substitution, changes in domestic final demand, and changes in export demand. Special attention is given to the importance of international trade and the patterns of change observed in rapidly growing and declining sectors. The results indicate that 71 percent of the sectors lost domestic market share to imports, but on balance international trade contributed to positive output change through increased exports. Technology changes became increasingly important in sectors of the economy experiencing either rapid growth or decline. Conversely, final demand, exports, and import substitution generally appeared to be most important in the slowly changing sectors. These findings confirm and expand on earlier work that indicated a dominant role for technology changes in explaining output changes in emerging and declining industries.     

Effects of World Demand and Competitiveness on Exports and Economic Growth

ABSTRACT There is little consensus in the development literature on whether it is supply explanations such as competitiveness levels, or, the external demand structure which drive the link between exports and economic growth. This paper attempts to reconcile the polarization of the aforementioned viewpoints by examining the effects of both world demand and a country's competitiveness in exports on the relationship between export growth and economic growth. The results indicate that only developing countries which are highly competitive and which also face relatively favorable external demand for their exports experience above-average growth. Weak external demand reduces the positive effects of exports on growth substantially but may be offset by high levels of competitiveness in trade. The results imply that both regional and Third World growth studies on the link between exports and economic growth would profit more from integrating both supply as well as external demand explanations rather than succumb to one of the two viewpoints.     

Innovation and Regional Growth in the Enlarged Europe: The Role of Local Innovative Capabilities,Peripherality, and Education

ABSTRACT In this paper, a formal model for the relationship between innovation and growth in European Union regions is developed drawing upon the theoretical contribution of the systems of innovation approach. The model combines the analytical approach of the regional growth models with the insights of the systemic approach. The cross‐sectional analysis, covering all the Enlarged Europe (EU‐25) regions (for which data are available), shows that regional innovative activities (for which a specific measure is developed) play a significant role in determining differential regional growth patterns. Furthermore, the model sheds light on how geographical accessibility and human capital accumulation, by shaping the regional system of innovation, interact (in a statistically significant way) with local innovative activities, thus allowing them to be more (or less) effectively translated into economic growth. The paper shows that an increase in innovative effort is not necessarily likely to produce the same effect in all EU‐25 regions. Indeed, the empirical analysis suggests that in order to allow innovative efforts in peripheral regions to be as productive as in core areas, they need to be complemented by huge investments in human capital.     

Investigation of e‐commerce in China in a geographical perspective

In recent years, e‐commerce has become a phenomenal symbol for the ongoing socio‐economic transformation in China. Driven by the growth of the Internet and cyberspace, e‐commerce changes both the traditional patterns of economic transactions and the social relations embedded in social activities. E‐commerce is a new catalyst for economic growth in China as it reduces restrictions to market access and the costs of transaction. This research examines the geography of e‐commerce in China within a theoretical framework grounded by social theory and neoclassical economics. After presenting a background of the development of e‐commerce in China, the spatiality of e‐commerce and its correlation to socio‐economic variables are examined with both quantitative and geovisualization techniques. Results of this research address that the growth of e‐commerce in China presents a nationwide inequality constrained by local economic, politic, and infrastructure conditions. The growth of e‐commerce in China presents a hybrid feature in terms of spatiality, which relies on structures in both cyberspace and physical space. Policy implications and suggestions for future research were suggested based on these empirical results. A discussion of limitations associated with this research and a concluding note close the research.     

Natural Amenities and Rural Development: Understanding Spatial and Distributional Attributes

ABSTRACT Contemporary resource management practice and rural development planning increasingly emphasize the integration of resource extractive industries with non‐market‐based recreational and amenity values. There is a growing empirical literature which suggests that natural amenities impact regional economies through aggregate measures of economic performance such as population, income, and/or employment growth, and housing development. We maintain that assessing the developmental aspects of amenity‐led regional change requires a more thorough focus on alternative measures of economic performance such as income distribution and spatial organization. In the applied research presented here we investigate relationships between amenities and regional economic development indicators. Results suggest mixed and generally insignificant amenity‐based associations which highlight the need for appropriate regional economic modeling techniques that account for often dramatic spatial autocorrelation of natural amenity attributes. We conclude that with respect to amenity driven economic growth and development “place in space” matters.     

Public Education Financing Trends and the Gray Peril Hypothesis

The effects of migrating seniors on the provision of local public services in rural communities is growing in importance because of the large number of retiring baby boomers and the increasing rate at which these retirees are locating outside traditional retirement destinations. Some communities are optimistic about attracting and retaining retirees as an economic development strategy, but others are concerned that inmigrating seniors may be reluctant to support local public services, such as education, bringing with them “Gray Peril.” This article attempts to clarify questions regarding the Gray Peril hypothesis and local ability and willingness to fund education in Tennessee, an increasingly popular retirement destination. To this end, county per pupil education expenditure growth is explained by growth trends in local property tax assessment and sales tax revenue, and migration patterns of the retirement‐aged population from 1962 to 2002.     

Endogenous Processes in European Regional Growth: Convergence and Policy

The traditional empirical approaches to the analysis of economic growth,cross‐section and panel data regressions are substantially uninformative withrespect to the issue of convergence. Whether national or regional economies appear to converge in terms of per capita income or productivity levels (the so‐called β‐convergence) critically depends on the way in which the empirical model is specified. Traditional specifications witness a disproportionate presence of proxies for forces leading towards divergence among the conditioning variables. It is therefore hardly surprising that these analyses find a positive and statistically significant value for the estimate of the speed of convergence. A more constructive use of cross‐section and panel data regressions is in the analysis of the determinants of growth. The present paper therefore builds on recent work on the role of different growth determinants (Cheshire and Carbonaro 1996) and analyses the growth performance of 122 Functional Urban Regions (FURs)over the period 1978–1994. This model explicitly recognizes growth as amultivariate process. In this new formulation it incorporates a spatialized adaptation of Romer's endogenous growth model (Romer 1990), developing the work of Magrini (Magrini 1997). Magrini's model originated from the view that technological knowledge has a very important tacit component that has been neglected in formal theories of endogenous growth. This tacit component, being the non‐written personal heritage of individuals or groups, is naturally concentrated in space. As a result, technological change is profoundly influenced by the interaction between firms and their local environments. The present paper reports the results of the estimation of a fully specified model of regional growth in per capita income. Particular attention is played to the role of research and development (R&D) activities, and to the influence of factors such as Universities that shape the local environments and have important policy implications. These results are then applied to quantifying the scope for policy to influence the growth process. Several simulations are presented deriving alternative growth outcomes across European regions that would have been obtained if those variables over which policy might have control—including the contribution of human capital—had had alternative values reflecting the realistic scope of policy makers' influence. The implications for convergence/divergence in regional per capita income levels are then analyzed using a Markov chain approach (Quah 1993 and 1996; Magrini 1999).     

Did incentives help municipalities recover from the Great Recession? Evidence from Midwestern cities

This study assesses the impacts of local business incentives in the largest urban areas of Illinois, Michigan, and Wisconsin, three Midwestern states that share similar histories and settings. We assembled a unique dataset combining information on two types of incentives, tax increment financing districts and tax abatements, together with socio‐economic, geographic, fiscal, and spatial competitive characteristics for all of the municipalities in six metropolitan areas. The outcome measures include employment growth, establishment formation, and business relocation. The analysis extends knowledge of the effects of economic development incentives in two ways. First, we improve upon previous research by incorporating key factors in municipal decisions to offer incentives. Second, we add to limited empirical evidence concerning local incentives following the Great Recession. Variation in the use of incentives reflects not only local decision‐making but also differing fiscal capacities and situations of adaptation to adverse economic conditions, with some governments pulling back on incentives and others initiating new approaches to retain or lure businesses.     

State Characteristics and the Locational Choice of Foreign Direct Investment: Evidence from Regional FDI in Mexico 1989–2006

ABSTRACT Despite the growing importance of foreign direct investment (FDI) in the Mexican economy, statistical evidence on the determinants of the regional distribution of foreign‐owned firms is seriously limited. In this paper, empirical findings are presented from a variety of econometric models that identify several regional characteristics influencing the locational choice of FDI. The main findings are threefold. First, several locational factors appear to be potentially important; these include regional demand, wages, schooling, infrastructure, and agglomeration economies. Second, the effect of agglomeration economies stems from several sources. In particular, the regional presence of agglomerations of manufacturing activity and of foreign‐owned manufacturing firms both have an independent positive effect on the locational decision of new FDI. Third, the locational process of maquiladora firms differs from the locational process of overall FDI. The actual findings suggest that regional demand and infrastructure, as suggested above, are not important locational factors for export‐oriented firms. Furthermore, whereas agglomeration economies from manufacturing and the presence of existing FDI attract new maquiladora investment, the presence of a regional agglomeration of services deters the location of new maquiladora firms. Finally, agglomeration economies appear to be more important in the locational process of maquiladora firms.     

Institutions and local growth coalitions in China's urban land reform: The case of Hangzhou High‐Technology Zone

Abstract: China's urban land reform is a gradualist process of transforming a planned land allocation system to an open land market system, while the ownership of the land remains under the control of the state. This process defines the relationships between local government and emerging non‐public interest groups in the land development process. These issues can be most clearly seen in the State‐Approved Development Zones, where municipalities have been encouraged to promote economic development and test out land policy initiatives. Using the institutionalist and urban growth machine analytical approaches to land development processes, this study examines the operation of development processes and the role of local government and its relationship with other interest groups. By employing a case study research strategy, focused upon the Hangzhou High‐Technology Zone, the study uncovered a local government‐led growth coalition which featured participation by other interest groups and revealed the applicability and variations when applying two strands of theories to a socialist economy in transition. Besides the land reform policy implications drawn from the case study evidence, the study concludes that the presence of interest groups and the missing community organisations unique to China give new theoretical implications and that both theories work much better with the economic domain than with the political domain largely because of a lagged political reform.     

Why Do Localities Provide Economic Development Incentives? Geographic Competition,Political Constituencies,and Government Capacity

U.S. states and localities often engage in economic development policies using incentives and abatements for specific firms or industries. Yet, there is very little empirical evidence suggesting that such policies are successful. Why, then, do governments engage in these policies? In order to answer this question, we employ a model that considers not only geographic and economic factors, but also, in a novel application, local political conditions. A unique survey of U.S. county governments forms the basis for our empirical assessment of both traditional economic development policies and new‐wave policies. Using probit, Poisson, negative binomial, and spatial econometric models, we find evidence that the use of incentives is inversely related to local economic conditions. Furthermore, we find Republican counties are more apt to use incentives, though counties dominated by one political party are less likely to use them.     

Local Preferences for Economic Development Outcomes: Analytical Hierarchy Procedure

Governments frequently formulate policies designed to stimulate regional economic development. Rarely, however, are efforts made to measure local preferences for economic development outcomes. While the political process should eventually sort out how well local governments are meeting the needs of their constituents, the irreversible nature of many development outcomes makes it preferable to incorporate local preferences directly into the decision making process. This paper presents a straightforward means of measuring preference trade‐offs. The analytical hierarchy procedure is applied to local economic development outcomes in three Virginia counties and is shown to improve the targeting of industries by incorporating local preferences in the targeting process. The method has wide applicability for different development decisions.     

Poverty and Local Governments: Economic Development and Community Service Provision in an Era of Decentralization

Social scientists have given substantial attention to poverty across U.S. localities. However, most work views localities through the lens of population aggregates, not as units of government. Few poverty researchers question whether governments of poorer localities have the capacity to engage in economic development and service activities that might improve community well‐being. This issue is increasingly important as responsibilities for growth and redistribution are decentralized to local governments that vary dramatically in resources. Do poorer communities have less activist local governments? Are they more likely to be engaged in a race to the bottom, focusing on business attraction activities but neglecting services for families and working people? We bring together two distinct literatures, critical research on decentralization and research on local development efforts, that provide contrasting views about the penalty of poverty. Data are from a unique, national survey of county governments measuring activity across two time points. The most consistent determinants of activity are local government capacity, devolutionary pressures, and inertia or past use of strategies. Net of these factors, levels and changes in poverty do not significantly impact government activity. There is no evidence the nations' poorest counties are racing to the bottom. Findings challenge views that poverty is a systematic structural barrier to pursuing innovative economic development policies and suggest that even poorer communities can take steps to build local capacity, resources, and networks that expand programs for local businesses and low‐wage people.     

The Quality of Education,Educational Institutions,and Cross‐Country Differences in Human Capital Accumulation

ABSTRACT Cross‐country studies of education and economic prosperity often reach conflicting results when using growth rates as the measure of economic development. However, growth rates lack persistence over time and may not accurately measure long‐term economic success over relatively short economic horizons. To overcome this potential specification problem, we estimate the relationship between key education variables and the capital to physical labor ratio. Using both cross‐sectional and panel specifications, we find that both the primary‐pupil–teacher ratio and decentralized education finance are associated with a larger capital to physical labor ratio. The relationship between human capital and expenditures, private education, and test scores are less robust.     

The formation of agricultural e‐commerce clusters: A case from China

Agricultural e‐commerce clusters are new phenomena that have emerged in rural China. In examining the case of Shuyang County in Jiangsu Province, this paper puts forward an integrated model revealing the formation mechanism of agricultural e‐commerce clusters. The paper shows that the formation of agricultural e‐commerce clusters involves four processes of technology introduction, technology diffusion, quality crisis, and industrial agglomeration based on elements such as industry bases, e‐commerce platforms, network facilities, logistics services, entrepreneurial talent, local government, and market demand. Rural social networks and imitation behaviors promote technology diffusion by reducing the cost of technology introduction, and industrial agglomeration is found in the economies showing a deepening of labor divisions and geographic agglomeration. Throughout the formation process, a quality crisis may occur due to a race to the bottom and the opportunistic behaviors of local farmers. This work suggests that regional e‐commerce development is a systematic project. Governments of developing countries should not only realize the positive impacts of e‐commerce for the development of the agricultural industry but also recognize the premise and logic of how e‐commerce can play a prominent role.     

Local Embeddedness,Market Focus,and Productivity: Evidence of Taiwanese Manufacturing MNE Subsidiaries in China

There has been considerable literature discussing the characteristics and importance of location‐specific factors in the context of Foreign Direct Investment (FDI), but very little literature linking location‐specific factors to productivity. This study explores, for each location‐specific factor, the relationship between the degree of local embeddedness and the labor productivity. We contribute to the body of literature on location‐specific factors by arguing that market focuses play a pivotal role in determining the impact of local embeddedness on productivity. Based on their strategic choices, we categorize Taiwanese manufacturing multinational enterprise (MNE) subsidiaries in China into two groups: the local‐market‐focus group and the export‐market‐focus group. The paper fits the Ordinary Least Squares (OLS) regression models to the export‐market‐focus group and the local‐market‐focus group separately. For these two groups, each local‐embeddedness variable exerts different effect on labor productivity. Results also suggest that local‐market‐focus FDI is more affected by the host country's local business environment than is export‐market‐focus FDI. Although this study cannot represent all foreign companies in China, its dynamism offers a rich context in which to explore a deeper understanding of foreign companies' business activities in China.     

Do Entrepreneurs Enhance Economic Growth in Lagging Regions?

Because support for entrepreneurship is often a core part of economic development strategies, we investigate whether it is important for growth in lagging, rural U.S. regions by focusing on Appalachia. While entrepreneurship has the advantage of being endogenous and “home grown,” previous research suggests that remote rural regions may lack the agglomeration economies to benefit greatly from entrepreneurship. Using county‐level data, we explore the relationship between entrepreneurship and economic growth, employing self‐employment and small business data as proxies for entrepreneurship. We look at the results for the Appalachian Regional Commission (ARC) region, using its immediate Appalachian neighbors outside the ARC region as a control group. Moreover, we also account for self‐sorting by proprietors to locate in expanding regions. Despite strong barriers to growth in Appalachia, our empirical results suggest that self‐employment is positively associated with employment and income growth, and that efforts to promote entrepreneurial capacity may be among the few economic development strategies with positive payoffs in remote regions.