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Local Economic Development

Local Economic Development
Analysis, Practices, and Globalization

Second Edition

December 2008 | 328 pages | SAGE Publications, Inc
Comprehensive coverage of traditional economic problems and issues are strengthened in this textbook by the recognition that the economic perspective should be supplemented by insights from other social sciences.

Features of this new Second Edition include:

- concepts, theories and tools are emphasized rather than specific programmes

- traditional topics such as location of activities, growth and development, economic structure, land use, neighbourhood development, and governance are presented in ways that connect theory to 'the ground' realities

- economic problems including transportation, poverty, immigration, education, urban management and housing are covered within the context of regional development

- numerous quantitative tools including location quotients, shift/share analysis, local multipliers, input-output analysis, statistical modeling, cost/benefit studies, discounted cash-flow analysis, among others, are described in an easy-to-understand manner.

Chapter 1. Local Economic Development in a Global Market
How Economists View the World

Models and Assumptions

Individual Behavior and Utility Maximization

Ideological Perspectives on Market Operations

How Markets Work

Supply and Demand

Supply, Demand, and Efficiency

Markets Are Not Always Efficient

The Role of Profits

Economic Development Defined

Careers in LED

The Nature of Regions

Types of Regions

Local, National, and Global Economic Development

Chapter 2. Business Location, Expansion, and Retention
Locational Factors


Transportation Cost Minimizing Models

Production Costs

National Political Climate and Stability

Opportunity Creation

The Decision Making Process


Practical Limitations on the Choice Process

Steps in the Corporate Site Selection Process

Changing Relative Importance of Locational Factors

Surveys of Location Factors

Survey Findings Past to Present

Conducting Business Retention and Expansion Programs

3. Markets, Urban Systems, and Local Development
Demand and Market Areas

Demand in a Spatial Setting

Competition for Markets

Threshold Demand and Range

Determinants of Market Size

The Urban Hierarchy and Urban System

Central Places

Goods and Services According to Urban Rank

Changing Urban Patterns

An Evaluation of the Central-Place Approach

Considerations Extraneous to Central-Place Theory

Transportation Costs

Market Overlap, Rate Absorption, and Price Discrimination

Product Differentiation

Agglomeration Economies

Institutional Factors

Non-employment Residential Locations and Commuting

Empirical Evidence

Globalization and Urban (City) Systems

How to Measure Areas of Influence

Survey Techniques

Reilly’s Law of Retail Gravitation

Probabilistic Models

Retail Spending

An Example

Hinterland Expansion Strategies

4. Economic Interdependence and Local Structure
Agglomeration Economies

Internal Agglomeration Economies

Direct Sales Purchases Linkages

Localization Economies

Urbanization Economies


Cluster Analysis

Measures of Economic Structure

North American Industrial Classification System (NAICS)

Location Quotients

Estimating Export Employment with Location Quotients

Surveys to Determine Export Activities

Coefficients of Specialization

Occupational Structure

Other Aspects of Regional Structure

5. Regional Growth and Development
Stages of Growth

Industrial Filtering (Life Cycle Model)

Adding New Work to Old

How Do Cities Move from One State to the Next?

Circular Flow Diagram

Elements of the Circular Flow Model

Equilibrium and Change

The Multiplier

The Export Base Theory of Growth

The Formal Income Model

How to Operationalize the Export Base Approach

Impact Studies and Export Base Forecasts

Critique of the Export-Base Approach

Primacy of Exports

Import Substitution


Exports Not Always Exogenous

Small versus Large Regions

Feedbacks among Regions

Non-basic Activities May Not Increase

Long-Run Instability of the Multiplier

Excessive Aggregation

Supply-Side Approaches

Intermediate Inputs



Land (Environmental Resources)


Supply and Demand Side Approaches: A Synthesis

6. Additional Tools for Regional Analysis
Shift and Share Analysis

An Application


Econometric and Simulation Models

Econometric Models


Importance-Strength Analysis

Input-Output: Analysis

The Transactions Table

The Table of Direct Coefficients

The Table of Direct and Indirect Coefficients

Input-Output Applications

7. Institutionalist Perspectives on Local Development
External Benefits from Economic Development

Job and Income Creation

Fiscal Improvement

Physical Improvements

Who Benefits From Growth?

Characteristics of Resource Supply

Opponents of Growth

Subsidies, Competition and Economic Development

Is Local Economic Development a Zero Sum Game?

Inefficiency and Oversubsidization

Discretionary versus Entitlement Subsidies

Cost Minimization versus Human Capital Strategies

Social Capital and Economic Development

Generic Economic Problems and Social Capital

Ambiguous Reception of Social Capital

Social Capital and Local Development Strategies

Using Social Capital to Mitigate Economic Development Conflicts

Social Network Analysis: Getting the Right People to the Table

Targeting Development Efforts

Cluster-Based Economic Development

8. Local Economic Development in a Flattening World
Models of Trade and Resource Flows

Comparative Advantage

Resource Mobility

Economics of Migration

Retiree-Migrant Development Strategy

Mobility of Capital

Innovations and Ideas

Spatial Diffusion

Implications for Regional Development

Mobility and Development Policy

Jobs-to-People versus People-to-Jobs

Immigration and Urban Development

9. Land Use
What Gives Land Value?

Land Rents and Value

The Nature of Rent, Productivity and Access

Highest and Best Use

The Land Development Process

Developer Goals

The Market Study

Environmental Impact Statements

Profit Feasibility

The Development Decision

Implications of Financial Analysis for LED

Land-Use Patterns

The Monocentric City Model

The Desity Gradient

Roads and Axial Development

Agglomeration and the Multiple-Nuclear City


Changing Land Use Patterns

Evaluating Metropolitan Spread (Urban Sprawl)

Land Use and Economic Development Tools

Zoning and Its Critics

Flexibility and Land Use Regulations

The Eminent Domain Controversy

Rights to Land and Economic Development

10. Housing and Neighborhood Development
Fundamentals of Housing Economics

Hedonic Pricing

Uncertainty, Market Imperfections, and Competition

Residential Location and Neighborhood Change

The Filtering-Down Theory

The Trade-Off Model

The Cultural Agglomeration Model
The Tiebout Model

The Aggregate Economic Fallout Model

Initiating and Perpetuating the Change Process

Housing Policy Issues

Rent Control versus Market Forces

Income Support versus Housing Assistance

Supply versus Demand Side Assistance

Ghetto Dispersal versus Ghetto Improvement

Dwelling-Unit versus Neighborhood Development

Linkage Between Local Housing and Global Financial Markets

Retail and Commercial Neighborhoods

The Social Economy of Neighborhoods

Community Development Corporations


Community Gardens

11. Poverty and Lagging Regions
The Nature of Poverty

Conceptual Approaches
Demographics of Poverty

Spatial Concentrations of Urban Poverty

Regional Linkages: The Spread and Backwash Effects

Empirical Studies of Spatial Linkages

Spatial Linkages and Theories of Spatial Poverty

Policy Issues

Strengthening Linkages

Improving Productivity

Addressing Wage Rigidities
Employment Guarantee Schemes in India

Income Support

12. Local Governance, Finance, and Regional Integration
Spatial Perspectives on Government Functions

Distribution and the Race to the Bottom

Local Allocation

Public Transportation – An Example

Size and Scope of Local Governments

Economies and Diseconomies of Scale

Decision-Making Costs

Improving Government Efficiency

Using Prices and Fees

Local Taxation and Economic Development


Intergovernmental Competition

Intergovernmental Grants and Coordination

Rearranging Functions


Market Based Reforms in Education

Fiscal Impact and Benefit-Cost Studies

Fiscal Impact Studies

Benefit-Cost Analysis

13. Local Economic Development Planning
The Future and Local Development

Concern with Values and Attitudes

Technological Change

Systems Orientation

Importance of Timing

Planning Perspectives on Development Policy

The Planning Process

Limits of Planning

Planning and Future Studies Tools

Delphi Forecasting



Environmental Scanning

About the Author

Concepts, theories and tools of Local Economic Development are discussed in this text book without neglecting the respective local institutional and cultural influences

Mrs Susanne Hilland
Wirtschaft 2, Heilbronn University
October 8, 2010

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ISBN: 9781412964838

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