local economic development in the urban context
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Local Economic Development
in the Urban Context
Israel Planners Association
February 2011
nachman@miu.org.il
www.miu.org.il
What is LED? The Old Simple View
• Local Economic Development is
Employment Generation
What is LED? The Current View
• The purpose of Local Economic Development is
– to build up the economic capacity of a local area
– to improve its economic future and
– the quality of life for all.
• It is a process by which
– public, business and non-governmental sector partners work collectively
– to create better conditions for economic growth and employment generation.
Why is LED Important? • Big differences in productivity possible since the Industrial Revolution
Pre - Industrial Revolution Agriculture
10x
64x
144x
A Brief History of LED
Nations Regions / Sectors
Cities and Towns
Hard Infrastructure and
Manufacturing Transplants
Attract Foreign Investment and Support Local Businesses
Skills/Education, Attractive Policies
and Public/Private Partnerships
1960s to early1980s
1980s to mid 1990s
Late1990s onwards
• The success of the Marshall Plan kicked off
three waves of LED
Summary of Outdated Thinking on LED
Top-Down approach
• Central Government conceived, controlled, and directed strategies
• Total dependence on central government
Attract outside businesses
• Promotion and support of big business transplants
• Attract outside investments and outside talent
Focus on regions
• Attempts to jumpstart and support LED over entire regions
• Connect under-developed regions to successful ones
Goal is Employment Generation
Summary of Current Thinking on LED
Participatory approach
• Including all stakeholders and sectors
• Led by local government
Growth of local businesses
• Promotion and support of innovation and entrepreneurship (both business and social)
• Business friendly policies
Focus on cities
• As engines of economic development
• Urban regeneration as a tool
Goal is quality of life for all
Employment Environment Livibility Social inclusion
Which Programs Do Not Work
(But We Still Keep Using Them!)
• Unfortunately there are countless examples of failed LED strategies and projects. These include: – Expensive untargeted foreign direct investment marketing
campaigns
– Supply-led training programs
– Excessive reliance on grant-led investments
– Over-generous financial inducements for inward investors (not only can this be an inefficient use of taxpayers money, it can breed considerable resentment amongst local businesses that may not be entitled to the same benefit).
– Business retention subsidies (where firms are paid to stay in the area despite the fact that financial viability of the plant is at risk)
– Reliance on "low-road" techniques, e.g., cheap labor and subsidized capital
– Government-conceived, -controlled, and -directed strategies http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTURBANDEVELOPMENT/EXTLED/0,,print:Y~isCURL:Y~contentMDK:
20185187~menuPK:402643~pagePK:148956~piPK:216618~theSitePK:341139,00.html
Urbanization Matters for
Economic Growth • Economic Growth and Urbanization are bi-
directionally causally connected
• ―… no country in the industrial age has
ever achieved significant economic growth
without urbanization.‖
Lecture 27 Urbanization Atanu Dey 9
Economic Growth Urbanization
The Big Picture
• The World is getting more urbanized
– Opportunities are focused in Cities where people concentrate
10 Lecture 27 Urbanization Atanu
Dey
Half the world’s population
occupies only 1.5% of the
world’s land area
2 9
3 7
4 8
6 1
15
2 5
3 9
5 4
17
2 4
3 9
5 45 1
6 6
7 3
8 0
4 2
6 1
7 7
8 5
6 4
7 4
8 0
8 7
6 1
7 27 3 7 5
0
20
40
60
80
100
Perc
ent
World Africa Asia Europe Latin
America
and the
Caribbean
Northern
America
Oceania
1950 1975 2003 2030
The World is Getting More Urbanized
11 Lecture 27 Urbanization Atanu Dey
Israel 92%
Cities Have Natural Economic Advantages
• Doubling city size will increase productivity by 3%-10%
• Successful cities grow to metros
• Successful metros grow to mega-metros (>5M pop) – 1955 – 11 Mega-Metros
– Today - 40 Mega-Metros
– 2015 – 60 Mega-Metros
12
1955 - 11 mega-metros 2015 - 60 mega-metros
Cities Have Natural Economic
Advantages • 40 Mega-Metros today
– A resident of a mega-metro is 8 times as productive in
goods, and 24 times as productive in innovations
13
Population Economic Output Innovations
Economic Output is Focused in City-Metros
Cities are Engines of
Economic Growth
• Why is this so?
– Economies of scale and of agglomeration
Lecture 27 Urbanization Atanu Dey 14
Urban Economies
• Sharing of fixed costs by a large quantity of outputs
• Input-sharing and competition within the industry
• innovation and exchange of ideas and technology
Lecture 27 Urbanization Atanu Dey 15
The 12 Urban Economies Type of economy of scale Example
Internal
1. Pecuniary Being able to purchase intermediate inputs at volume discounts
Technological
2. Static
technological Falling average costs because of fixed costs of operating a plant
3. Dynamic
technological Learning to operate a plant more efficiently over time
External or
agglomeration
Localization
Static
4. ―Shopping‖ Shoppers are attracted to places where there are many sellers
5. ―Adam Smith‖ Outsourcing allows both the upstream input suppliers and downstream firms to
profit from productivity gains because of specialization
6. ―Marshall‖
labor pooling
Workers with industry-specific skills are attracted to a location where there is a
greater concentration
Dynamic
7. ―Marshall-
Arrow-Romer‖
learning by doing
Reductions in costs that arise from repeated and continuous production activity
over time and which spill over between firms in the same place
Urbanization
Static
8. ―Jane Jacobs‖
innovation
The more that different things are done locally, the more opportunity there is for
observing and adapting ideas from others
9. ―Marshall‖
labor pooling
Workers in an industry bring innovations to firms in other industries; similar to
no. 6 above, but the benefit arises from the diversity of industries in one location.
10. ―Adam Smith‖
division of labor
Similar to no. 5 above, the main difference being that the division of labor is
made possible by the existence of many different buying industries in the same
place
Dynamic
11. ―Romer‖
endogenous
growth
The larger the market, the higher the profit; the more attractive the location to
firms, the more jobs there are; the more labor pools there, the larger the
market—and so on
12. ―Pure‖ agglomeration Spreading fixed costs of infrastructure over more taxpayers; diseconomies arise
from congestion and pollution
Cities have natural
economic advantages
• But poor city design undermines these advantages
and creates barriers to economic development,
whereas good city design can enhance these
advantages.
• How can we leverage the natural economic
advantages of cities?
• Compact mixed-use development in the city center
that focuses on pedestrian and public transport
access is key.
LED in the Context of Cities from the easiest to the most difficult
LED in a Great City
LED in the Region of a Great City
LED in a Town Outside a Great City Region
LED in a City that is not Great
A Great City generates much more wealth than it consumes for mere existence.
A Great City generates enough wealth to support growth in the city as well in its surrounding region.
LED in a Great City
LED in the Region of a Great City
LED in a Town Outside a Great City Region
LED in a City that is not Great
LED in a Great City
• What is the role of Urban Planning and Transportation in creating a
great place to live and to develop economically?
It can become a LED generator
If the City provides
Density Mixed use Mixed age buildings
Small Blocks
LED in a Great City
LED in the Region of a Great City
LED in a Town Outside a Great City Region
LED in a City that is not Great
LED in the Region of a Great City
• Create a great place to live and to develop
economically
• Provide attractive and efficient access to The City
• The City will do the rest
LED in a Great City
LED in the Region of a Great City
LED in a Town Outside a Great City Region
LED in a City that is not Great
The Five Economic Forces Exerted by Cities on Their Own Regions
City markets City jobs City
developed technology
Transplanted city work
City generated
capital
How to Jumpstart the cycle of city
development
Density Variety
& Access
Innovation &
Culture
Development Intensity
Opportunities
Quality Of
Life
People
The
―handle‖
LED in a Great City
LED in the Region of a Great City
LED in a Town Outside a Great City Region
LED in a City that is not Great
How do you
advance ever closer
to your vision of a
successful town,
based on daily
decisions and based
on existing budgets?
City Center Renewal as a LED Tool or
How to increase Density, Variety and Access
First stage:
• Surgical urban intervention plan in the public space
Second stage:
• Renewal of the public space
Third stage:
• Private Development Construction and Renovation near the public space
Use the ―charrette‖ collaborative planning
tool as the basis of a LED program •Create a great place to live for local
residents
•Create a great place to succeed for local
businesses
•Leverage the true identity of the city / town
as seen by the local residents
•Local residents strengthen their sense of
belonging by planning their town
•Leverage existing budgets for
public building projects to
implement the plan
•Local residents are
empowered by seeing their
plans adopted and
implemented
•Provide loans to accelerate
private storefront and
residence renewal
Thank You and see you in November 2011
nachman@miu.org.il
February 2011
www.miu.org.il
כנס אשקלון־מרחב לפיתוח כלכלי עירוני "העיר כמנוע לצמיחה כלכלית"
Participatory approach
• Including all stakeholders and sectors
• Led by local government
Growth of local businesses
• Promotion and support of innovation and entrepreneurship (both business and social)
• Business friendly policies
Focus on cities
• As engines of economic development
• Urban regeneration as a tool
Goal is quality of life for all
Employment Environment Livibility Social inclusion
The critical role of Merhav in
LED in Israel
Participatory approach
• Charrette – collaborative planning with all stakeholders
• Quality in Density Toolbox for all sectors
• Mayors Institute
Growth of local businesses
• Making the local environment great for the locals
• Compact, quality and sustainable cities provide opportunities and breed innovation
Focus on cities
• We view the city as the key mechanism that provides people the opportunities to fulfill their inherent potential
Goal is quality of life for all
In order to improve the quality of living in Israel, while contributing to the global sustainability effort, the MIU promotes quality urban living based on compact,
quality and sustainable urban environments.
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