Lecture 2

1
Lecture 2

• Central Cities and Regional Market Analysis

2
(No Transcript)
3
Cities, Counties, Metropolitan Areas
County
Metropolitan Area

Central Business District
Central City
Smaller Cities
4
Atlanta Metropolitan Area
5
Metropolitan Statistical Area (MSA)

• Formed by the U.S. Bureau of the Census
• Basis for creating a combination of contiguous
  counties based on two principles
• Functional Integrity Principle (economic links
  between counties)
• Homogeneity Principle (similarities between
  counties)

6
Metropolitan Statistical Area (MSA)
Nassau County
Duval County
Baker County
St. Johns County
Clay County
7
Core of a City

• Dense collection of inhabitants of relatively
  large population
• Where none of the citizens make their living
  directly from agricultural activity
• Self-Supporting Workforce
• Where social and economic relationships are
  relatively complex and hierarchical
• Formal Government Structures

8
Causes of City Formation

• Economies of Scale
• Produce more goods in fewer facilities
• Economies of Agglomeration
• Location Synergy
• Positive Locational Externalities
• Co-existence of different industries
• Need for Break-Bulk Points and Distribution
  Centers in Goods Transportation

9
City Growth Atlanta

• Key railroad junction
• Close to Washington, D.C. by rail
• Higher-level state and federal governmental and
  financial service functions in Atlanta (due in
  part by existing rail)
• Delta Airlines established HUB in 1930s
• Cultural and Social Factors, breeding
  entrepreneurial talent and relatively successful
  race relations

10
Evolution of Top 10 Ranking Cities
11
Additional Movement Patterns

• Overcrowding and High Costs of Living
• Los Angeles to Phoenix
• Weather and Climate
• Movement to Arizona and Florida
• Technological Development
• New Industry to open
• Boston, San Francisco, Raleigh-Durham
• Cheaper Transportation / Entertainment
• Las Vegas, Orlando

12
Top 10 Cities of Growth (1950 1998)
13
Lecture 2

• The Internet and Growth Implications for the
  Future

14
Industrialization Period

• Strong correlation between specialized services
  in the manufacturing of goods and large
  employment inputs
• Implies population growth
• Laborers and skilled workers migrate to areas
  where work opportunities are better and/or
  available

15
Information Age

• Transportation and distribution costs often
  inconsequential
• Producers may not require hierarchy of linkages
  to cities of smaller sizes for efficient
  production and distribution of goods and
  services.
• Shop can be set up in small towns

16
Future of Internet and Growth

• Lower communication costs will allow second- and
  third-tier cities to grow faster than larger
  cities
• Cities with good climate and overall quality of
  life will grow faster than those with few local
  amenities.
• City location and growth will certainly be
  determined more by access to environmental and
  cultural amenities, and less by purely physical
  or geographical centrality
• Population densities should decline as people
  lose the need to live close to work
• Mixed-Use Communities away from CBD

17
Lecture 2

• Economic Base Analysis

18
Economic Base

• Sources of a regions total income (income of all
  households in the region)
• Income from current employment
• Salary, bonuses, commissions
• Self-employment business income
• Income from accumulated wealth or pensions
• Portfolio returns from investments
• Pension fund payments of annuities
• Transfer payments from Government
• Social Security
• Welfare, housing, food, medical support

19
Economic Base Analysis

• Export Sector Employment bringing revenues into
  a region (i.e. manufacturers of any product
  that serves more than the local population and
  brings revenues into the local region from
  outside)
• --Location Quotient (LQ)
• Service Sector Employment geared toward serving
  the local population

20
Circular Flow of Income Model
Real Flows Movement of Productive Services
Consumer Goods and Services
HOUSEHOLDS
BUSINESSES
Productive Resources (labor, land, capital,
entrepreneurship)
21
Circular Flow of Income Model
Money Flows Movement of Cash
Consumption Expenditures
HOUSEHOLDS
BUSINESSES
Resource Payments (wages, rents, dividends,
interest, profit)
22
Economic Base of the Local Economy

• Economic Base Theory
• Identification Variables for Household Sector
• Size of population, number of families, number of
  households
• Age composition of the population
• Income composition of population
• Size of families and households
• Occupational composition of population
• Gender composition of population
• Marital status of population
• Educational attainment level of population

23
Economic Base of the Local Economy

• Economic Base Theory
• Identification Variables for Business Sector
• Standard Industrial Classification (SIC) System
  (U.S. Census Bureau) Identifies industrial
  activities according to numerical code
• Allows comparisons between economies (by MSA,
  city, or county)

24
Economic Base of the Local Economy (SIC)

• Agriculture
• Mining
• Construction
• Manufacturing
• Transportation, Communications, Utilities
• Wholesale Trade
• Retail Trade
• Finance, Insurance, and Real Estate (FIRE)
• Services (personal, business)
• Services (professional, educational)
• Public Administration (federal, state, local
  government agencies)
• Nonclassifiable Establishments

25
Export Base Analysis

• How Would Economic Growth Affect the
• Following Sectors of a Local Economy?
• Residential Housing Market
• Residential and Commercial Construction Industry
• Purchasing Power of Consumers
• Retail Real Estate and Industry
• Employment

26
Local Investment Providing Growth

• Reinvestment from earnings or borrowed funds
  allows firms to grow faster, assuming
  wisely-utilized capital
• Cities which are home to high-growth firms with
  high retained earnings and significant expansion
  plans will see growth

27
Government Incentives for Growth

• Local governmental acquisition of large sites for
  future development
• Providing physical infrastructure
• Tax abatement, credits, or breaks
• Government financing
• Creating Foreign Trade Zones with tax-exempt
  status on exports