1. Local Economic Development Theories
PAD 5805: Lecture 1

2. What is ED? Three essential elements:
Establishes a minimum standard of living for all and increases the standard over time.
Reduces inequality.
Promotes and encourages sustainable resource use and production.

3. Challenges and Opportunities
The Nature of New Economy
Manufacturing to Service/ Information
Globalization
Mobility of capital, labor
Faster pace
Outmoding of products, skills
Disasters
Earthquakes, hurricanes, flooding, etc.
Human Resources
Skills capacity

4. Challenges and Opportunities
Suburbanization
Inner city/ ghettoization/ gentrification
Crime control
Safety
Global Warming
Climate change at local level
Housing Crisis
Rising/ Falling home prices

5. ED Theories Neoclassical Theory Economic base theory
Productivity = f (capital, land, labor)
Technology = constant
Regional equilibrium
Government as a referee (enforcing laws) and providing national security
Economic base theory
Exports from local area
Competitive advantage
Regional specialization

6. ED Theories Product Cycle theory Location theories
Products have life cycles of innovation and diffusion process
Emphasis on creation of new products for ED
Location theories
Classical: L, L, L!!!
Minimize transport costs
Resources and markets
Forward/ backward linkages
Localization vs agglomeration economies
Growth poles; forward/ backward linkages

7. ED Theories Central place Social theory
Specialized urban center (downtown/ Central Business District, CBD); Satellite developments
Monocentric and polycenric cities
Social theory
Social justice
Poverty
Regional disequilibria
Government as a protector, redistributor

8. ED Theories Attraction Models New Markets model Place matters
Amenities matter (climate, natural attractions)
Importance of third places
New Markets model
People matter—consumer base; human resources
Asset based economic development
Local natural resources

9. Question for thought
Do the theories adequately describe local economic development?
Think in terms of Jane Jacobs’s article