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The Higher ED Blog: What’s new in economic development research (winter 2016 edition)

Michelle Madden / February 1, 2016

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The Higher ED Blog: What’s new in economic development research (winter 2016 edition)

The Higher ED Blog publishes a quarterly economic development research roundup that shares new research practitioners might find useful. The series usually draws from Economic Development Quarterly, Regional Studies, and the Journal of Rural Studies, all reputable peer-reviewed academic journals.

Arts and culture really do attract knowledge workers

By now, most of us will be aware of the creative class and its love of the arts. Economic developers looking to attract this group are told to increase local arts and culture offerings in order to compete with large, metropolitan cities. While it is true that cities with lots of culture typically have many creative workers, it is less clear if cultural offerings actually impact their migration decisions.

A group of American researchers decided to use regression analysis to determine if the knowledge class (a refinement of Richard Florida’s creative class that excludes occupations that serve the local population) is attracted to consumable creative amenities. Their analysis compared US metro areas with one, two or three major performing arts organizations (symphony, opera, and ballet/dance) to those with none, looking for differences in the growth rate of new knowledge class jobs.

After controlling for other common attractors like the existing number of college grads, the base number of knowledge class workers, and a variety of other amenities, they determined that performing arts organizations were indeed associated with increases in knowledge class jobs.  The numbers are small, but suggest a cumulative impact, as the presence of one organization was associated with a 1.1% increase in knowledge class employment, two with a 1.5% increase, and all three with a 2.2% increase. Even at 1.1%, the impact is considerable. San Antonio, Texas gained 245,000 jobs in the knowledge class between 2000 and 2010, the parameters used by the study. Based on the findings, the authors estimate that 2,700 of those workers were attracted thanks to the additional competitive advantage created by the San Antonio Symphony. Based on the mean knowledge class income of $84,000 in San Antonio, the symphony is therefore associated with generating $220 million in direct additional employment income in the city.

The authors are careful to point out that knowledge class workers are influenced by many factors and building an opera house is not guaranteed to draw them. Even so, the results add to the literature showing that communities that support arts and culture are typically more innovative and support more STEM jobs.

Read more: The Association Between Professional Performing Arts and Knowledge Class Growth: Implications for Metropolitan Economic Development. Economic Development Quarterly, 30(1).

How do urban and rural communities approach culture-led policy development?

Culture-led policies, like developing local performing arts organizations to attract knowledge workers (for example), are typically developed in and for an urban context. A researcher from Norway wondered if rural communities have tried to adopt these ideas and, if so, if they adapted them for the rural context.

The paper first establishes what culture-led development looks like in its original form. The researcher surveyed the urban studies literature and identified three common culture-led development strategies, each with a different goal:

  • Providing public spaces for culture (such as a sport arena) to revitalize public interaction and create community pride.
  • Investing in amenities (like entertainment offerings, public art installations, and festivals) and/or place branding to attract tourists, investors, skilled workers, etc. to spur growth.
  • Fostering entrepreneurship in arts and culture, or using culture to stimulate innovation and creativity, to promote economic activity.

Next, the researcher examined the local policies of four rural communities in Norway to see if these ideas appeared. He found that increasing attractiveness and promoting economic activity were not high priorities. Instead, culture was much more frequently used as a way to make municipalities better places to live for the community’s existing inhabitants. The policies mostly focused on cultural services (like sport arenas and libraries), financial support for culture-focused civic clubs and organizations, and initiatives to encourage social gatherings. As the researcher put it, “there seems to be a more embedded and down-to-earth attitude in the municipal strategies that are more focused on heritage, tradition, local participation, mobilization, well-being, and contentment than on competition and fast economic growth” (p.6).

The paper suggests that while communities of all sizes need to grow social capital, the type and role of culture differ in urban and rural areas. In cities, culture is seen as a commodity created by professionals to be bought and consumed. In rural communities, culture is more participatory, providing opportunities to engage with other members of the community, strengthen democracy, and build local identity.

Rural economic developers interested in using urban-based cultural strategies to promote attractiveness and economic activity should consider these differing views about the role of culture. A strategy is more likely achieve local buy-in if it contributes to the community first, and outsiders second.

Read more: The ‘actually existing’ cultural policy and culture-led strategies of rural places and small towns. Journal of Rural Studies, 44.

Further research on the impact of economic incentives

In many parts of the world, governments interested in economic development are willing to part with large sums of money to incentivize the relocation and expansion of businesses. This continues to occur even though most studies on the topic conclude that these incentives do little to encourage economic growth. Supporters say these programs successfully create growth, while opponents insist that these companies would have relocated or expanded without the incentive. And so the debate rages on.

The latest program to be dissected is the Oklahoma Quality Jobs (QJ) program, created in 1993, which provides cash payments of up to 5% of newly created gross taxable payroll in targeted industries for up to 10 years. In order to determine the overall economic development impact of the program, the researchers from Oklahoma State University compared the growth of communities with participating companies to similar communities with no participating companies in both Oklahoma and Kansas (which does not have an equivalent program).

The researchers controlled for education levels, racial characteristics, growth rates, median household income, and the number of manufacturing jobs but could not find a significant impact on community-level income, population, median home value, or manufacturing job growth. There was some evidence that the QJ program increased median household income growth by 10% compared to similar communities in Kansas, but the relationship was not statistically significant when the kernel matching method was used. The data also showed lower poverty growth rates at the community level, but these were not supported by data at the state-level.

So the results possibly indicate some returns on select indicators. The paper ends with the safe, if not satisfying, conclusion that even with long term data, the impacts of specific programs are difficult to measure. That means the debate is still open, for now at least.

Read more: Do Incentive Programs Cause Growth? The Case of the Oklahoma Quality Jobs Program and Community-Level Economic Growth. Economic Development Quarterly, 30(1).

 

About the author

Michelle Madden is the editor of Higher ED. She is also the Outreach Manager for the Economic Development Program and a graduate of the LED master’s program.  She has authored a number of the articles in this series on behalf of the students, and has published several of her own blogs on economicdevelopment.org as well. Follow her on Twitter at @michelle_mad.

About the series

Higher ED: Insights for the Next Economy is a platform for students, guest speakers, staff and faculty of the University of Waterloo’s professional and graduate economic development programs to share knowledge with the field at large. The series takes works destined for an academic audience and reworks them into a fresh, easy-to-digest blog article.

Established in 1988, the Local Economic Development program is the only master’s program in Canada devoted solely to local economic development. It offers a balance between theory and practice by combining coursework, a major research paper, an internship, and weekly seminars featuring guest speakers. Students are prepared for careers in local, community, or regional economic development.

The Economic Development Program is a nationally-accredited provider of professional training. It delivers certification programs and seminars that offer a deep understanding of the Canadian context in a convenient block format. Peer learning is combined with informative lectures and practical case studies to provide dynamic instruction that is beneficial for junior and senior-level practitioners.

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