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Graded Assignment 3

Part I

Economic Development of Cities

The economic growth of the cities is determined by the state and the living standards of people

living in those particular cities. The living standards of people are determined by employment

and unemployment in the city and its environs. In order for the city people to be employed and

have high living standards which in turn refer to the economic development and growth of the

city, there have to be some industries and companies which provide jobs for such individuals.

Not only getting jobs and having monthly salaries getting into their bank accounts, these salaries

must be such that they translate to higher income per capita which is the basis for any economic

background of a place.

In “The Economic Performance of Cities: A Markov-Switching Approach” (2008) by

Owyang, Piger, Wall and Wheeler it is stated that the human capital is the main determinant in

the economic growth of the city and the level of the population in the city provides ready labor

what is very critical. In order for the cities to grow as compared to the previous years, the

population growth of the city has to be in the positive direction. This simply means that the

population growth has to be right skewed. This concept has been experienced in many cities in
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the United States, where labor is even outsourced from other countries outside America and

provides enough people for the jobs. This has enhanced the economic growth of cities like Los

Angeles, New York and other cities. However, the rate of employment growth is different across

all the cities in the United States where the average growth rate per year is 0.37 with the standard

deviation of 0.26, where cities like Los Angeles record high growth of about 1.38 percent and

other cities like Hartford experience an average decline with 0.16 percent per year. This state

shows that people prefer settling in the highly developed cities compared to the lowly and

developing ones.

Economic Development Goals, Strategies and Policies

The growth across the cities is designed by two phases which simply comprise of high and low

growth paths. The high economic growth path is demonstrated by the high industrial growth

together with the high population growth, while the low economic path is demonstrated by

industry mix only. Areas with high population mixed with the high industry growth provide a

good ground for the economic growth of the particular area or city. Whereas the areas with high

growth rate in industries but no human capital will not experience high growth at all cities like

St. Louis they can make projects and invest in more industries in order to attract people to settle

there and offer good payments to the workers. This is a good strategy to create a good economy

which will not be affected by the recession periods.

The Markov-switching models explain how people or simply the human labor switches

from the areas of high economic growth path to the low economic growth path. This switching is

characterized by the activity of people starting businesses where they can get high income to

supplement their household and business expenses. When people switch from one city to the
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other or from one business to the other, the level of population changes and these create high

human capital in the settled city which makes it a high economic growth path and affects the city

of origin. However, there are variables that make people switch from one city to the other. These

variables that affect the population and the density include: the city size which comprises of the

wages, rent, congestion and other cases that affect the human development and their capabilities

to cope with life.

The fresh graduates prefer settling in the cities with low rents and wages that they will be

able to afford with their little starting salaries. The areas preferred become high economic growth

paths while the others remain low. There are certain courses or types of degrees and diplomas

that match with some cities due to the types of businesses carried there. Students graduating with

degrees and diplomas in the service fields like finance, accounting and much more tend to settle

in the areas with businesses which will offer employment to these fields compared to the areas

with other activities like the manufacturing industries. This forms a good basis for the cities who

want to achieve a stable and reliable economic growth where they can invest both in the services

and manufacturing fields and attract potential labor forces that will develop the economy of the

city.

The criteria of high and low phases of economic growth may be experienced by all the

cities, though the cities which are of high phase tend to adjust very fast. For example between the

years between 1990-1991, New York experienced a short, low phase period but immediately

adjusted to its initial phase after the one year. While other city like Phoenix Mesa’s low phases

last much longer and tend to take time before adjusting. These low phases are experienced

mostly in the times of the national recession when the economy is not doing so well. Some cities

do not even feel the effect of a recession at the same time the national ones are experienced, but
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feel it afterwards when the other cities have adjusted. This case of recession can be used by the

city management to figure out how to strategize the operations and make a good economic flow

even in the times of recession.

Part II

Economic Development in Boston

Some of the aspects that the city of Boston is promoting are: safe streets, strong economy,

market availability and diverse workforce. In its website, Boston has described its incentive for

starting up a business or doing business with it. One of its incentives is its safe streets with a

highly skilled labor force. Boston has a strong economic environment that enables it to attract

business of the urban neighborhood that has a density of purchasing power. Boston provides

financial support through Boston loan Development Corporation which provides loans to people

who are interested in setting up a business in the city. The loan can cover purchase of machinery,

construction, buying of new business property or improvement of leasehold. The city also

provides bonds that are paid by Boston Industrial Development Financing Authority (BIDFA).

The credit borrowed is paid by the Commonwealth of Massachusetts or BIDF. This increases

employment level and economic growth in the city (Businesses).

In the website, the city is also promoting restore Boston program that lends funds of up to

$ 7000 for neighboring businesses. The main purpose is to help businesses do renovation on their

front stores. The program does not provide funds only but it also provides free professional

architectural design for businesses to ensure they are well planned and developed. Boston also

has various programs that aim at improving economic development. This includes Boston's Back

Streets that promotes industrial development in terms of real estate, resource and partnership and
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business assistance. For those who want to invest in life sciences sector the city has Life Tech

Boston program that helps with site location. City of Boston promotes technological

development as a means of economic development. The city has also aimed at increasing capital

base of its residents, through loans and grants available in the city. All these strategies and

policies translate into a favorable environment for growth. Human capital is also there what

provides enough labor for development purposes. One of its policies is to promote industrial

growth by offering capital to residence, business an industrial training (Owyang, Piger, Wall &

Wheeler 542).

Economic Development of Nashville

In Nashville some special features that might attract business include: its central location, highly

educated workforce and thriving business community. It is also one of the cities where people

are lowly taxed in terms of personal tax income as compared to the other cities. It offers low-cost

business opportunities. The city has many colleges and it is also known as music city since it is

known for music industry. Availability of educated people attracts business to Nashville. At

times, the city provides incentive for businesses expanding to Davidson County. These

incentives are Cash Grants, Payment in Lieu of Taxes (PILOT), Tax Increment Financing (TIF)

and One-Stop Business Assistance. Cash grants may be available for firm relocating to Nashville

especially technology firms and corporate headquarters (Economic Development). The

relocating firm should be capable of creating around 500 work places within the first five years.

PILOT helps large business to acquire a tax freeze or a reduction in tax. This is done after the

business is analyzed by the city government in terms of capital investments, job creation and

wage rates. Urban growth is promoted by cities’ population, as according to Markov Switching

Model, composition of a population is very important when it comes to economic development.

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Nashville city is a city composed of educated population, what gives it a potential for industrial

development due to availability of human capital and industrial mix (Owyang, Piger, Wall &

Wheeler 540). The PILOT program is designed to promote industrial growth which is essential

for economic growth.

Part III

1. In each metropolitan area, the top three industry groups that have the largest location

quotients include:

Nashville-Davidson--Murfreesboro--Franklin, TN MSA

- Transportation, Trade and Utilities.

- Business services and professionals.

- Health services and Education.

St. Louis, MO-IL MSA

- Transportation, Trade and Utilities.

- Health services and Education.

- Leisure and Hospitality.

Boston-Cambridge-Newton, MA-NH MSA

- Transportation, Trade and Utilities.

- Business services and professionals.

- Health services and Education.

2. The three lowest industry groups in terms of location quotients include:

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Nashville-Davidson--Murfreesboro--Franklin, TN MSA

- Natural resources and mining.

- Information.

- Other services.

St. Louis, MO-IL MSA

- Other services.

- Information.

- Manufacturing.

Boston-Cambridge-Newton, MA-NH MSA

- Mining and natural resources.

- Information.

- Construction.

Comparison

As compared to all the three locations Boston-Cambridge-Newton, MA-NH MSA has the

highest level of national industry followed by St. Louis, MO-IL MSA and then Nashville-

Davidson--Murfreesboro--Franklin, TN MSA. However, by looking at the level of industries,

area like Nashville has some industries that are higher than the highly ranked quotient area. For

example, like the unclassified industry, Nashville has 45 industries as compared to Boston which

has 13.

Export Base Concept

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The leading location, which is Boston, has industries which are basic in the region. These

industries have high amounts of output as compared to others in the same location. In the

industries like the health services and education, business services and education, Boston exports

these services to the other areas in St. Lois and Nashville where the production is very low.

Part IV

1. The monthly housing for a family with one parent and two children

Boston-Cambridge-Newton, MA-NH MSA

- $ 1,444

St. Louis, MO-IL MSA

- $ 830

Nashville-Davidson--Murfreesboro--Franklin, TN MSA

- $ 819

2. The monthly housing for a family with two parents and three children

Boston-Cambridge-Newton, MA-NH MSA

- $ 1798

St. Louis, MO-IL MSA

- $ 1081

Nashville-Davidson--Murfreesboro--Franklin, TN MSA

- $ 1089
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The monthly housing for the family with one parent and two children differs a lot in the

three cities. Boston city is the most expensive city followed by St. Louis and Nashville

respectively. As the results were obtained in the location quotient calculations, the cities with the

highest levels of industries are the ones with the most expensive housings. This shows that the

higher the levels of industries in a particular state, the higher the income and hence the higher

expenses in households. Though in the case of two parents and three children Nashville is not

much more expensive than St. Louis, hence the difference is not big.
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Works Cited

“Business”. City of Boston.gov. Official Web Site of the City of Boston. n.d. Web. 29 Apr. 2014.

http://www.cityofboston.gov/business/

Cullingworth, J. Barry. "Cities and Economic Development." Cities 8.3 (1991): 248-252. Print.

“Economic Development”. Nashville.gov. Mayor's Office of Economic & Community

Development. n.d. Web. 29 Apr. 2014.

http://www.nashville.gov/Mayors-Office/Priorities/Economic-Development.aspx.

Owyang, Michael T., Jeremy M. Piger, Howard J. Wall, & Christopher H. Wheeler. "The

Economic Performance of Cities: A Markov-Switching Approach." Journal of Urban

Economics 64.3 (2008): 538-550. Print.