Lecture 2

Central Cities and

Regional Market
Analysis
Cities, Counties,
Metropolitan Areas

County

Metropolitan Area

$$ Central Business District

Central City

Smaller Cities
Atlanta Metropolitan Area
Metropolitan Statistical Area (MSA)

 Formed by the U.S. Bureau of the Census

 Basis for creating a combination of contiguous counties

based on two principles:
– Functional Integrity Principle (economic links between
counties)
– Homogeneity Principle (similarities between counties)
 Metropolitan Statistical Area (MSA)

Nassau
County Duval
County
Baker
County
St. Johns
County
Clay
County
Core of a City
 Dense collection of inhabitants of relatively large
population

 Where none of the citizens make their living directly

from agricultural activity
– Self-Supporting Workforce

 Where social and economic relationships are

relatively complex and hierarchical
– Formal Government Structures
Causes of City Formation
 Economies of Scale
– Produce more goods in fewer facilities

 Economies of Agglomeration
– Location Synergy

 Positive Locational Externalities

– Co-existence of different industries

 Need for “Break-Bulk” Points and Distribution Centers in Goods

Transportation
City Growth: Atlanta
 Key railroad junction
 Close to Washington, D.C. by rail
 Higher-level state and federal governmental and
financial service functions in Atlanta (due in part by
existing rail)
 Delta Airlines established HUB in 1930’s
 Cultural and Social Factors, breeding entrepreneurial
talent and relatively successful race relations
Evolution of
Top 10 Ranking Cities
1850 Top 10 Cities 2000 Rank 2000 Top 10 Cities

New York 1st New York

Baltimore 16th Los Angeles

Boston 20th Chicago

Philadelphia 5th Washington-Baltimore

New Orleans 31st San Francisco - Oakland - San Jose

Cincinnati 24th Philadelphia

St. Louis 50th Boston

Pittsburgh 49th Detroit

Louisville 64th Dallas

Buffalo 56th Houston

Additional Movement Patterns
 Overcrowding and High Costs of Living
– Los Angeles to Phoenix
 Weather and Climate
– Movement to Arizona and Florida
 Technological Development
– New Industry to open
– Boston, San Francisco, Raleigh-Durham
 Cheaper Transportation / Entertainment
– Las Vegas, Orlando
Top 10 Cities of Growth
(1950 – 1998)

City Percent Growth Average Growth Per Year

Phoenix 1251% 26%

Miami - Ft. Lauderdale 697% 15%

Tampa - St. Pete 668% 14%

Atlanta 638% 13%

San Diego 542% 11%

Dallas - Ft Worth 462% 10%

Houston 461% 10%

Denver - Bolder 374% 8%

Seattle - Tacoma 334% 7%

Portland - Salem 319% 7%

Lecture 2

The Internet and

Growth Implications
for the Future
Industrialization Period

 Strong correlation between specialized

services in the manufacturing of goods and
large employment inputs
– Implies population growth
– Laborers and skilled workers migrate to areas
where work opportunities are better and/or
available
Information Age

 Transportation and distribution costs often

inconsequential
 Producers may not require hierarchy of
linkages to cities of smaller sizes for efficient
production and distribution of goods and
services.
 “Shop” can be set up in small towns
Future of Internet and Growth
 Lower communication costs will allow second- and
third-tier cities to grow faster than larger cities
 Cities with good climate and overall quality of life will
grow faster than those with few local amenities.
 City location and growth will certainly be determined
more by access to environmental and cultural
amenities, and less by purely physical or
geographical “centrality”
 Population densities should decline as people lose
the need to live close to work
– Mixed-Use Communities away from CBD
Lecture 2

Economic Base
Analysis
Economic Base
Sources of a region’s total income (income of all households in the
region)

1. Income from current employment

1. Salary, bonuses, commissions
2. Self-employment business income
2. Income from accumulated wealth or pensions
1. Portfolio returns from investments
2. Pension fund payments of annuities
3. Transfer payments from Government
1. Social Security
2. Welfare, housing, food, medical support
Economic Base Analysis

Export Sector: Employment bringing revenues into a

region (i.e.: manufacturers of any product that serves
more than the local population and brings revenues
into the local region from outside)
--Location Quotient (LQ)

Service Sector: Employment geared toward serving the

local population
Circular Flow of Income Model

“Real Flows:” Movement of Productive Services

Consumer Goods and Services

HOUSEHOLDS BUSINESSES

Productive Resources
(labor, land, capital, entrepreneurship)
Circular Flow of Income Model

“Money Flows:” Movement of Cash

Consumption Expenditures

HOUSEHOLDS BUSINESSES

Resource Payments
(wages, rents, dividends, interest, profit)
Economic Base of the
Local Economy
Economic Base Theory:
Identification Variables for Household Sector
 Size of population, number of families, number of households
 Age composition of the population
 Income composition of population
 Size of families and households
 Occupational composition of population
 Gender composition of population
 Marital status of population
 Educational attainment level of population
Economic Base of the
Local Economy

Economic Base Theory:

Identification Variables for Business Sector
Standard Industrial Classification (SIC) System (U.S. Census
Bureau): Identifies industrial activities according to numerical
code
Allows comparisons between economies (by MSA, city, or county)
Economic Base of the
Local Economy (SIC)
 Agriculture
 Mining
 Construction
 Manufacturing
 Transportation, Communications, Utilities
 Wholesale Trade
 Retail Trade
 Finance, Insurance, and Real Estate (FIRE)
 Services (personal, business)
 Services (professional, educational)
 Public Administration (federal, state, local government agencies)
 Nonclassifiable Establishments
Export Base Analysis
How Would Economic Growth Affect the
Following Sectors of a Local Economy?

 Residential Housing Market

 Residential and Commercial Construction Industry
 Purchasing Power of Consumers
 Retail Real Estate and Industry
 Employment
Local Investment Providing Growth

 Reinvestment from earnings or borrowed funds allows

firms to grow faster, assuming wisely-utilized capital

 Cities which are home to high-growth firms with high

retained earnings and significant expansion plans will
see growth
Government Incentives for Growth

 Local governmental acquisition of large sites for

future development
 Providing physical infrastructure
 Tax abatement, credits, or breaks
 Government financing
 Creating Foreign Trade Zones with tax-exempt status
on exports