URSI
100--Introduction to the City
Economy of Cities
Fable of George & Mabel:
- Innovative perception
- Comparative advantage
- Demand
- Production
- Employment
- Surplus
- Market
- Maintenance mode
- Growth Mode
Export base model
- Urban economies are not self-sufficient
- Performance of export sector determines fate of entire city economy
- “Demand driven” model
- “Basic multiplier”—ratio of total city income to earnings on exports
- “Location quotient”—ratio of local to export employment, compared to national average
- Simplification—ignores
- Transfer payments
- Flow of investment
- Supply-side limitations
- “import substitution”
- capacity to develop new export firms/industries
Competition
- Between cities—locational advantage
- Transportation
- Climate & amenities (“mailbox income”)
- Infrastructure (capital and “quality of life”)
- Characteristics of local labor force
- Education & skills
- Wage rate
- Entrepreneurialism
- Public safety
- Tax burden
- Agglomerative economies (more important for smaller firms) & localization economies
- Diseconomies of scale
- Urban Hierarchies
- “Competition frontiers”
- Hierarchy of city sizes
- Globalization of competition
- Causes
- Better communications & transportation
- Growing ease of international financial transactions
- Reduction in tariffs & trade barriers
- Effects
- Weakening of unions
- Polarization of wages based on skills
- Advantages of economic growth
- Tightens local labor market, pushing wages up and lowering unemployment
Expands tax base, easing fiscal pressure on local & state government
Based on LEVY, J.M. 2000. Urban
© 2003 A.J.Filipovitch
Revised 1 January 06