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Local Economic Development in the urban context


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presented at the Israeli Planners Association annual meeting 2011

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Local Economic Development in the urban context

  1. 1. Local Economic Development in the Urban Context Israel Planners Association February 2011
  2. 2. What is LED? The Old Simple View• Local Economic Development is Employment Generation
  3. 3. 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.
  4. 4. Why is LED Important?• Big differences in productivity possible since the Industrial Revolution 144x 64x 10x Pre - Industrial Revolution Agriculture
  5. 5. A Brief History of LED• The success of the Marshall Plan kicked off three waves of LED 1960s to 1980s to mid Late1990s early1980s 1990s onwards Regions / Cities and Nations Sectors Towns Skills/Education, Hard Attract Foreign Attractive Policies Infrastructure and Investment and and Manufacturing Support Local Public/Private Transplants Businesses Partnerships
  6. 6. Summary of Outdated Thinking on LED Goal is Employment Generation Top-Down Attract outside Focus on approach businesses regions • Central Government • Promotion and • Attempts to conceived, controlled, support of big jumpstart and and directed business support LED over strategies transplants entire regions • Total dependence on • Attract outside • Connect under- central government investments and developed regions outside talent to successful ones
  7. 7. Summary of Current Thinking on LED Goal is quality of life for all Employment Environment Livibility Social inclusion Participatory Growth of local Focus on cities approach businesses• Including all • Promotion and • As engines of stakeholders and support of economic sectors innovation and development• Led by local entrepreneurship • Urban regeneration government (both business and as a tool social) • Business friendly policies
  8. 8. 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,,print:Y~isCURL:Y~contentMDK:20185187~menuPK:402643~pagePK:148956~piPK:216618~theSitePK:341139,00.html
  9. 9. Urbanization Matters for Economic Growth• Economic Growth and Urbanization are bi- directionally causally connected Economic Growth Urbanization• ―… no country in the industrial age has ever achieved significant economic growth without urbanization.‖ Lecture 27 Urbanization Atanu Dey 9
  10. 10. The Big Picture• The World is getting more urbanized – Opportunities are focused in Cities where people concentrateHalf the world’s populationoccupies only 1.5% of theworld’s land area Lecture 27 Urbanization Atanu 10 Dey
  11. 11. The World is Getting More Urbanized 100 Israel 92% 87 85 80 80 80 77 74 73 75 73 72 66 64 61 61 61 60 Percent 54 54 51 48 42 39 39 40 37 29 25 24 20 15 17 0 World Africa Asia Europe Latin Northern Oceania America America and the Caribbean 11Lecture 27 Urbanization Atanu Dey 1950 1975 2003 2030
  12. 12. 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
  13. 13. 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 Population Economic Output Innovations 13 Economic Output is Focused in City-Metros
  14. 14. Cities are Engines of Economic Growth• Why is this so? – Economies of scale and of agglomeration Lecture 27 Urbanization Atanu Dey 14
  15. 15. 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 15 Lecture 27 Urbanization Atanu Dey
  16. 16. The 12 Urban EconomiesType of economy of scale Example 1. Pecuniary Being able to purchase intermediate inputs at volume discounts 2. StaticInternal Falling average costs because of fixed costs of operating a plant technological Technological 3. Dynamic Learning to operate a plant more efficiently over time technological 4. ―Shopping‖ Shoppers are attracted to places where there are many sellers Outsourcing allows both the upstream input suppliers and downstream firms to 5. ―Adam Smith‖ Static profit from productivity gains because of specialization Localization 6. ―Marshall‖ Workers with industry-specific skills are attracted to a location where there is a labor pooling greater concentration 7. ―Marshall- Reductions in costs that arise from repeated and continuous production activity Dynamic Arrow-Romer‖ over time and which spill over between firms in the same place learning by doing 8. ―Jane Jacobs‖ The more that different things are done locally, the more opportunity there is for innovation observing and adapting ideas from othersExternal oragglomeration 9. ―Marshall‖ Workers in an industry bring innovations to firms in other industries; similar to Static labor pooling no. 6 above, but the benefit arises from the diversity of industries in one location. Urbanization Similar to no. 5 above, the main difference being that the division of labor is 10. ―Adam Smith‖ made possible by the existence of many different buying industries in the same division of labor place 11. ―Romer‖ The larger the market, the higher the profit; the more attractive the location to Dynamic endogenous firms, the more jobs there are; the more labor pools there, the larger the growth market—and so on Spreading fixed costs of infrastructure over more taxpayers; diseconomies arise 12. ―Pure‖ agglomeration from congestion and pollution
  17. 17. 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.
  18. 18. 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.
  19. 19. LED in a Great City LED in the Region of a Great CityLED in a Town Outside a Great City Region LED in a City that is not Great
  20. 20. LED in a Great City LED in the Region of a Great CityLED 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? If the City provides Mixed age Small Density Mixed use buildings Blocks It can become a LED generator
  21. 21. LED in a Great City LED in the Region of a Great City LED in the Region of a Great CityLED in a Town Outside a Great City Region LED in a City that is not Great • Create a great place to live and to develop economically • Provide attractive and efficient access to The City • The City will do the rest The Five Economic Forces Exerted by Cities on Their Own Regions City City TransplantedCity markets City jobs developed generated city work technology capital
  22. 22. LED in a Great City How to Jumpstart the cycle of city development 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 Density Quality Variety Of & The Life Access ―handle‖ InnovationOpportunities People & Culture How do you advance ever closer to your vision of a successful town, based on daily decisions and based Intensity Development on existing budgets?
  23. 23. City Center Renewal as a LED Tool or How to increase Density, Variety and Access•Provide loans to accelerateprivate storefront and Use the ―charrette‖ collaborative planningresidence renewal 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 First stage: businesses • Surgical urban •Leverage the true identity of the city / town intervention plan in as seen by the local residents the public space •Local residents strengthen their sense of belonging by planning their town •Leverage existing budgets for public building projects to implement the planThird stage: •Local residents are• Private Development Second stage: empowered by seeing their Construction and • Renewal of the plans adopted and Renovation near the public space implemented public space
  24. 24. Thank You and see you in November 2011‫כנס אשקלון־מרחב לפיתוח כלכלי עירוני‬ "‫"העיר כמנוע לצמיחה כלכלית‬ February 2011
  25. 25. The critical role of Merhav in LED in Israel Goal is quality of life for allIn order to improve the quality of living in Israel, while contributing to the global sustainability effort, the MIU promotes qualityLivibility Employment Environment Social inclusion urban living based on compact, quality and sustainable urban environments. Participatory Growth of local Focus on cities approach businesses• Charrette all Including – • Making theand Promotion local • Weengines of as As view the city collaborative and stakeholders environment great support of the key mechanism economic planning with all sectors for the locals innovation and that provides development• stakeholders Led by local • entrepreneurship Compact, quality • peopleregeneration Urban the• government Quality in Density (both business and and sustainable opportunities to fulfill as a tool Toolbox for all social) cities provide their inherent sectors • opportunities and Business friendly potential• Mayors Institute breed innovation policies