Wednesday, April 13, 2016

Cities, growth, talent, location choice

When it comes to economic growth, it is all about human capital. Add the importance of human capital externalities, and you want cities with properly trained and skilled work forces. This morning's WSJ reports that one of employers' favorite data sources in this quest is LinkedIn profiles. "Companies Flock to Cities With Top Talent."

I have argued that the importance of location choice within cities cannot be overestimated. Here follows an abstract of a talk I will give at USC today on "Cities and Economic Growth: Emergent Spatial Organization"

Prosperity and economic growth require robust specialization and exchange. This means the formation and maintenance of numerous complex supply chains. These include supply chains for things and supply chains for ideas. The latter can be via transactions and/or realized positive externalities.

All supply chains have a geographic dimension. Firms carefully choose what to make vs what to buy and also where to buy it, from near or far. The whole system tends to a pattern of locations that denote realized transactions (and transactions costs) as well as realized externalities. The city remains a competitive producer if these costs are contained.

Cities have been seen as “engines of growth.” This means they offer attractive supply chain formation and management opportunities. Networking and location opportunities are significant as these choices are made. Flexible land markets denote more such opportunities. Cities are the spatial realizations of many complex supply chains. This is much too complex for top-down planning.