presented at the Israeli Planners Association annual meeting 2011

1. Local Economic Development
in the Urban Context
Israel Planners Association
February 2011
nachman@miu.org.il
www.miu.org.il

2. What is LED?
The Old Simple View
• Local Economic Development is
Employment Generation

3. What is LED?
The Current View
• The purpose of Local Economic
Development is
– to build up the economic capacity of a local area
– to improve its economic future and
– the quality of life for all.
• It is a process by which
– public, business and non-governmental sector
partners work collectively
– to create better conditions for economic growth
and employment generation.

4. Why is LED Important?
• Big differences in productivity possible since the Industrial Revolution
144x
64x
10x
Pre - Industrial Revolution Agriculture

5. A Brief History of LED
• The success of the Marshall Plan kicked off
three waves of LED
1960s to 1980s to mid Late1990s
early1980s 1990s onwards
Regions / Cities and
Nations
Sectors Towns
Skills/Education,
Hard Attract Foreign
Attractive Policies
Infrastructure and Investment and
and
Manufacturing Support Local
Public/Private
Transplants Businesses
Partnerships

6. Summary of Outdated Thinking on LED
Goal is Employment Generation
Top-Down Attract outside Focus on
approach businesses regions
• Central Government • Promotion and • Attempts to
conceived, controlled, support of big jumpstart and
and directed business support LED over
strategies transplants entire regions
• Total dependence on • Attract outside • Connect under-
central government investments and developed regions
outside talent to successful ones

7. Summary of Current Thinking on LED
Goal is quality of life for all
Employment Environment Livibility Social inclusion
Participatory Growth of local
Focus on cities
approach businesses
• Including all • Promotion and • As engines of
stakeholders and support of economic
sectors innovation and development
• Led by local entrepreneurship • Urban regeneration
government (both business and as a tool
social)
• Business friendly
policies

8. Which Programs Do Not Work
(But We Still Keep Using Them!)
• Unfortunately there are countless examples of failed
LED strategies and projects. These include:
– Expensive untargeted foreign direct investment marketing
campaigns
– Supply-led training programs
– Excessive reliance on grant-led investments
– Over-generous financial inducements for inward investors (not
only can this be an inefficient use of taxpayers money, it can
breed considerable resentment amongst local businesses that
may not be entitled to the same benefit).
– Business retention subsidies (where firms are paid to stay in the
area despite the fact that financial viability of the plant is at risk)
– Reliance on "low-road" techniques, e.g., cheap labor and
subsidized capital
– Government-conceived, -controlled, and -directed strategies
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTURBANDEVELOPMENT/EXTLED/0,,print:Y~isCURL:Y~contentMDK:
20185187~menuPK:402643~pagePK:148956~piPK:216618~theSitePK:341139,00.html

9. Urbanization Matters for
Economic Growth
• Economic Growth and Urbanization are bi-
directionally causally connected
Economic Growth Urbanization
• ―… no country in the industrial age has
ever achieved significant economic growth
without urbanization.‖
Lecture 27 Urbanization Atanu Dey 9

10. The Big Picture
• The World is getting more urbanized
– Opportunities are focused in Cities where people concentrate
Half the world’s population
occupies only 1.5% of the
world’s land area
Lecture 27 Urbanization Atanu 10
Dey

11. The World is Getting More Urbanized
100
Israel 92%
87
85
80 80
80 77
74 73 75
73 72
66 64
61 61 61
60
Percent
54 54
51
48
42
39 39
40 37
29
25 24
20 15
17
0
World Africa Asia Europe Latin Northern Oceania
America America
and the
Caribbean
11
Lecture 27 Urbanization Atanu Dey
1950 1975 2003 2030

12. Cities Have Natural Economic Advantages
• Doubling city size will increase productivity by 3%-10%
• Successful cities grow to metros
• Successful metros grow to mega-metros (>5M pop)
– 1955 – 11 Mega-Metros
– Today - 40 Mega-Metros
– 2015 – 60 Mega-Metros
12
1955 - 11 mega-metros 2015 - 60 mega-metros

13. Cities Have Natural Economic
Advantages
• 40 Mega-Metros today
– A resident of a mega-metro is 8 times as productive in
goods, and 24 times as productive in innovations
Population Economic Output Innovations
13
Economic Output is Focused in City-Metros

14. Cities are Engines of
Economic Growth
• Why is this so?
– Economies of scale and of agglomeration
Lecture 27 Urbanization Atanu Dey 14

15. Urban Economies
• Sharing of fixed costs by a large quantity of outputs
• Input-sharing and competition within the industry
• innovation and exchange of ideas and technology
15
Lecture 27 Urbanization Atanu Dey

16. The 12 Urban Economies
Type of economy of scale Example
1. Pecuniary Being able to purchase intermediate inputs at volume discounts
2. Static
Internal Falling average costs because of fixed costs of operating a plant
technological
Technological
3. Dynamic
Learning to operate a plant more efficiently over time
technological
4. ―Shopping‖ Shoppers are attracted to places where there are many sellers
Outsourcing allows both the upstream input suppliers and downstream firms to
5. ―Adam Smith‖
Static profit from productivity gains because of specialization
Localization 6. ―Marshall‖ Workers with industry-specific skills are attracted to a location where there is a
labor pooling greater concentration
7. ―Marshall-
Reductions in costs that arise from repeated and continuous production activity
Dynamic Arrow-Romer‖
over time and which spill over between firms in the same place
learning by doing
8. ―Jane Jacobs‖ The more that different things are done locally, the more opportunity there is for
innovation observing and adapting ideas from others
External or
agglomeration 9. ―Marshall‖ Workers in an industry bring innovations to firms in other industries; similar to
Static labor pooling no. 6 above, but the benefit arises from the diversity of industries in one location.
Urbanization
Similar to no. 5 above, the main difference being that the division of labor is
10. ―Adam Smith‖
made possible by the existence of many different buying industries in the same
division of labor
place
11. ―Romer‖ The larger the market, the higher the profit; the more attractive the location to
Dynamic endogenous firms, the more jobs there are; the more labor pools there, the larger the
growth market—and so on
Spreading fixed costs of infrastructure over more taxpayers; diseconomies arise
12. ―Pure‖ agglomeration
from congestion and pollution

17. Cities have natural
economic advantages
• But poor city design undermines these advantages
and creates barriers to economic development,
whereas good city design can enhance these
advantages.
• How can we leverage the natural economic
advantages of cities?
• Compact mixed-use development in the city center
that focuses on pedestrian and public transport
access is key.

18. LED in the Context of Cities
from the easiest to the most difficult
LED in a Great City
LED in the Region of a Great City
LED in a Town Outside a Great City Region
LED in a City that is not Great
A Great City generates much more wealth than it consumes for mere existence.
A Great City generates enough wealth to support growth in the city as well in its surrounding region.

19. LED in a Great City
LED in the Region of a Great City
LED in a Town Outside a Great City Region
LED in a City that is not Great

20. LED in a Great City
LED in the Region of a Great City
LED in a Town Outside a Great City Region
LED in a City that is not Great
LED in a Great City
• What is the role of Urban Planning and Transportation in creating a
great place to live and to develop economically?
If the City provides
Mixed age Small
Density Mixed use
buildings Blocks
It can become a LED generator

21. LED in a Great City
LED in the Region of a Great City
LED in the Region of a Great City
LED in a Town Outside a Great City Region
LED in a City that is not Great
• Create a great place to live and to develop
economically
• Provide attractive and efficient access to The City
• The City will do the rest
The Five Economic Forces Exerted by Cities on Their Own
Regions
City City
Transplanted
City markets City jobs developed generated
city work
technology capital

22. LED in a Great City How to Jumpstart the cycle of city
development
LED in the Region of a Great City
LED in a Town Outside a Great City Region
LED in a City that is not Great
Density
Quality Variety
Of & The
Life Access
―handle‖
Innovation
Opportunities People &
Culture
How do you
advance ever closer
to your vision of a
successful town,
based on daily
decisions and based
Intensity Development on existing budgets?

23. City Center Renewal as a LED Tool
or
How to increase Density, Variety and Access
•Provide loans to accelerate
private storefront and
Use the ―charrette‖ collaborative planning
residence renewal tool as the basis of a LED program
•Create a great place to live for local
residents
•Create a great place to succeed for local
First stage: businesses
• Surgical urban •Leverage the true identity of the city / town
intervention plan in as seen by the local residents
the public space
•Local residents strengthen their sense of
belonging by planning their town
•Leverage existing budgets for
public building projects to
implement the plan
Third stage: •Local residents are
• Private Development
Second stage: empowered by seeing their
Construction and • Renewal of the plans adopted and
Renovation near the public space implemented
public space

24. Thank You
and see you in November 2011
‫כנס אשקלון־מרחב לפיתוח כלכלי עירוני‬
"‫"העיר כמנוע לצמיחה כלכלית‬
nachman@miu.org.il
February 2011
www.miu.org.il

25. The critical role of Merhav in
LED in Israel
Goal is quality of life for all
In order to improve the quality of living in Israel, while contributing to the global
sustainability effort, the MIU promotes qualityLivibility
Employment Environment Social inclusion
urban living based on compact,
quality and sustainable urban environments.
Participatory Growth of local
Focus on cities
approach businesses
• Charrette all
Including – • Making theand
Promotion local • Weengines of as
As view the city
collaborative and
stakeholders environment great
support of the key mechanism
economic
planning with all
sectors for the locals
innovation and that provides
development
• stakeholders
Led by local • entrepreneurship
Compact, quality • peopleregeneration
Urban the
• government
Quality in Density (both business and
and sustainable opportunities to fulfill
as a tool
Toolbox for all social)
cities provide their inherent
sectors • opportunities and
Business friendly potential
• Mayors Institute breed innovation
policies