Academic journal article Chicago Fed Letter

Revitalizing Inner Cities: Connecting Research and Practice

Academic journal article Chicago Fed Letter

Revitalizing Inner Cities: Connecting Research and Practice

Article excerpt

America's inner cities are often depicted as socially and economically dysfunctional places, ridden with crime, lacking investment, and with limited opportunities.1 For decades, however, researchers have been noting the heterogeneous nature of inner cities. Inner cities often have particular advantages, including a strategic location near central business districts, proximity to transportation infrastructure, communication nodes and other regional assets, a relatively young population, and a strong entrepreneurial drive among residents, all of which position them to compete and integrate successfully with their economic regions.2

Understanding the sources of job growth, competitiveness, and economic integration of inner cities has become an important priority for policymakers and community development practitioners. On September 15-16, 2015, the Upjohn Institute for Employment Research, Economic Development Quarterly (EDQ) and Sage Publications, in partnership with the Federal Reserve Bank of Chicago and the Initiative for a Competitive Inner City (ICIC), convened researchers and practitioners at a conference entitled Revisiting the Promise and Problems of Inner City Economic Development to examine these questions. The conference was an outgrowth of and a precursor to a special edition of Economic Development Quarterly, a journal that strives to bridge the gap between academic research and hands-on experience in work force and economic development.3 The conversations centered around the relationship of the inner city to the rest of the region, the implications of clusterbased industrial development strategies, and the scaling of efforts to improve human capital and access to financing for entrepreneurs in lower-income neighborhoods. The forthcoming special issue of Economic Development Quarterly will examine the competitive advantages of inner cities and feature research on clusters and inner-city growth. This Chicago Fed Letter presents a brief overview of the research and practices highlighted at the conference.

In his keynote address, Michael Porter, professor at Harvard Business School and founder of the Initiative for a Competitive Inner City, noted that structural changes in the U.S. economy over the past 20 years have added to the challenges of strengthening inner cities. In 2000, poverty in inner cities accounted for 19% of U.S. poverty and 31% of U.S. minority poverty. 4 By 2013, inner cities accounted for 23% of U.S. poverty and 34% of U.S. minority poverty.5 From 2003 to 2013, net jobs in the inner city declined by 0.4%, compared with a 0.7% increase in the central cities. Thus, central city employment growth in many instances has not translated into job expansion in the inner city.

Some inner cities are economic success stories, however, and much has been learned about what works in revitalizing economically underperforming areas. According to Porter, decades of research have established that a cluster-based growth strategy is one of the key levers for inner city economic growth. Clusters may be either local or traded-local clusters provide services or products mostly for the local market; traded clusters provide services or products to other regions or countries. Some of the local clusters in inner cities, such as health services, education and training, local utilities, logistics, and commercial services, added close to 645,000 jobs between 2003 and 2013. In some inner cities, traded clusters, such as apparel, water transportation, environmental services, and education and knowledge centers added more than 110,000 jobs during this period. Mercedes Delgado, visiting professor at the MIT Sloan School of Management, noted that 44% of inner cities have strong clusters and 40% of inner cities are connected to strong regional clusters.6 In line with Porter's view, Delgado said that the presence of strong clusters in inner cities, especially if the clusters are also strong in the nearby region (central city, metropolitan statistical area [MSA]) leads to statistically significant increases in employment growth in the inner cities. …

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