November 2010
Moderator: Welcome to the Federal Reserve Bank of Atlanta's Economic Development podcast series. I'm Todd Greene with the Federal Reserve Bank of Atlanta. Today, we're talking with Dr. Yolanda Kodrzycki, director of the New England Public Policy Center of the Federal Reserve Bank of Boston.
While many industrial cities continue to face economic weakness and job decline, some cities have experienced resurgence. In a discussion paper titled "Reinvigorating Springfield's Economy: Lessons from Resurgent Cities," Dr. Kodrzycki explores how resurgent cities have implemented strategies to increase investment and grow jobs. Through studying 26 cities in 11 states, the report provides interesting and important findings for economic development success in communities which have experienced significant structural changes to their local economies.
After serving as a senior research economist specializing in regional, labor market, and public sector economics, Dr. Kodrzycki assumed her current role as the director of the New England Public Policy Center of the Boston Fed in February 2010. The New England Public Policy Center conducts and disseminates research and analysis of regional and economic policy issues.
Dr. Kodrzycki, thank you for joining me today.
Dr. Yolanda Kodrzycki: Thanks for the opportunity.
Moderator: The premise of your report is centered on "resurgent" versus "nonresurgent" cities. What is a resurgent city and what is a nonresurgent city, and what are the characteristics of each?
Kodrzycki: This distinction between resurgent and nonresurgent cities is based on examining their histories. Fifty years ago, the residents of older, mid-sized cities in the U.S. enjoyed median-family incomes in line with the national average, if not even a little higher than the national average. And, generally speaking, poverty was not more prevalent in these cities than nationally. But in the last half of the 20th century, older, mid-sized cities experienced major challenges. One challenge to their economies was de-industrialization. In 1960, about one-third to one-half of the workers in these cities made their living in manufacturing, but opportunities for city residents to find jobs in manufacturing fell both as manufacturing activity shifted to suburban locations, and as manufacturing became a smaller part of the U.S. economy.
The other main challenge to mid-size cities was suburbanization. Cities lost population, and they tended to house poorer populations than before. Basically, resurgent cities are the ones that were relatively successful compared to their peers. As of the mid-2000s, they had higher median family income, and their income ranking improved more over time than the other cities. Similarly, their poverty rates were lower than those of the other cities, and their percentage point change in poverty was better over time. They showed more population growth or less population decrease. And, finally, many of them received nationwide recognition for revitalization.
Moderator: Springfield, Massachusetts, was selected as the baseline case for the nonresurgent city. Why Springfield, and how did you go about selecting its peer cities?
Kodrzycki: Several years back, the 12 Federal Reserve Banks partnered with the Brookings Institution in Washington, D.C., in a study of concentrated poverty. The Boston Fed chose several impoverished neighborhoods in Springfield for its analysis. As this book on concentrated poverty was being finalized, we challenged ourselves to go beyond the research and to support the economic revitalization of the city of Springfield. And what resulted is a major, multi-year commitment between the Federal Reserve Bank of Boston and the various stakeholders in Springfield's economy and, in particular, the residents of the poorer neighborhoods that abut Springfield's downtown area.
The choice of the other 25 peer cities was based on objective criteria. Like Springfield, each of the peer cities has remained, to this day, the primary urban center of its respective metropolitan area. The peer cities bear responsibility not only for the well-being of their own residents but also for the residents of the surrounding regions. They provide job opportunities, medical care, higher-education resources, and a range of other services and amenities that are vital to the entire area where they are located.
Moderator: Your research indicates there are several factors to support why the resurgent cities have done better economically than Springfield and its other peer cities. What were some of the most important factors?
Kodrzycki: Time and again, we noted the importance of leadership on the part of key institutions or individuals, along with collaborations among the various constituencies, when it's an interest in economic development. In some cases, the turnaround started with efforts on the part of the public sector, while in other cases, nongovernmental institutions or even private developers were at the forefront. In these success stories, the instigators of city revitalization recognize that it was in their own interest to prevent further deterioration in the local economy, and they took responsibility for bringing about improvements. Regardless of who initiated the turnaround, however, economic development efforts span decades and involve collaborations among numerous organizations and sectors.
Another factor that was common throughout the resurgent cities was improvement in human capital—and, in fact, currently the share of the adult population with a bachelor's degree or more is higher on average in the resurgent cities than in the U.S. as a whole. We found that institutions of higher education have participated in reinvigorating city economies. Often they are major employers. In some places, colleges and universities have made substantial payments to municipal governments in lieu of taxes; they have redeveloped urban property, created venture capital funds and business incubators, engaged in local purchasing efforts, and provided financial incentives for their employees to live in the city. Of course, colleges and universities also play vital roles as educators.
Finally, I'd note that the resurgent cities have recognized the need to do long-term planning and to reevaluate their economic revitalization strategies from time to time. They've engaged their communities in visioning projects that go out 10 to 20 years, but then they look at the performance metrics and make periodic adjustments. For example, one of the resurgent cities we studied developed a strategy around biotech activity, but they came to realize that biotech firms often employ only small numbers of workers, and they take a long time to achieve profitability. That city broadened its focus within life sciences to attract medical devices companies that could become an important source of jobs.
One other thing that I would like to note about the resurgent cities: they've all continued to struggle with extending prosperity to a broader share of their population. They found it necessary to launch specific initiatives targeted at disadvantaged neighborhoods.
Moderator: While some of these success factors could be expected, like long-term planning, there were some others that were a bit surprising. In economic development, we know, for example, that leadership and human capital development are ingredients for success, but your report suggests that these factors are of critical importance. Why are leadership and human capital development so important, and what were some successful examples your research uncovered?
Kodrzycki: I think leadership—and particularly collaborative leadership—is important because economic transformation is so complex. And if you are looking for outside sources of funding and jobs, such as state and federal government, foundations, and businesses, they often require proof of joint efforts in order to contribute to a city's development.
Two of the resurgent cities we studied were Providence, RI, and Evansville, IN. Both cities had energetic, ambitious mayors who were intent on turning around their cities. They embarked on impressive infrastructure projects such as waterfront development and building roads and bridge construction, but the fact is mayors only have a certain amount of power while they are in office, and they are in office only so long. So if you are talking about major improvements to the infrastructure, these take time, and they have to be complemented by other sorts of development, especially human capital development that universities and foundations can provide. A city's importance of human capital development in resurgent cities—I think that's a reflection of the fact that the U.S. has increasingly a knowledge-based economy. Economic success depends on having a well-educated workforce, as well as on the ability to develop new industries.
Moderator: Given the need to improve local and regional economies and grow jobs with scarce resources, how might economic developers and local leaders prioritize these issues?
Kodrzycki: The most important advice I can give is to build the civic infrastructure first. When local leaders find out that economists from the Federal Reserve are interested in their city, they tend to ask questions, such as "What are the industries of the future?", "What are the industries we should be trying to attract?". But, if you look across all of the cities in our sample, they now employ more workers in healthcare and social systems than in manufacturing. Other important industries are retail trade, education, and leisure and hospitality. But the point is, both the resurgent cities and the nonresurgent cities have diversified their economy. Once the civic infrastructure is in place, local leaders have a much better shot at attracting the financial and technical resources they need to revitalize their city.
Moderator: Dr. Kodrzycki, thank you for joining us today.
Kodrzycki: It was a pleasure.
Moderator: This concludes our podcast. We've been speaking with Yolanda Kodrzycki, director of the New England Public Policy Center of the Federal Reserve Bank of Boston. To read "Reinvigorating Springfield's Economy: Lessons from Resurgent Cities," visit www.bos.frb.org. For more podcasts on this topic and others, please visit the Atlanta Fed's website at www.frbatlanta.org. If you have comments or questions, please email podcast@frbatlanta.org.
Thanks for listening.