Cities and Economic Success: Some Lessons from the United States

A number of indicators suggest the U.S. economy has been performing reasonably well over the past several years. For example, unemployment has declined, GDP is up (though income growth at the high end continues to outpace growth of incomes of those of more modest means), and productivity has grown apace. But there are some darker clouds on the horizon. On the other side of the ledger, many are concerned with potential fallout from a pop in the socalled housing bubble, rising foreclosures (especially in the subprime market), a low household savings rate, and a precarious government fiscal position. While many analyses focus at the national level, ultimately the health of the aggregate economy is determined by the health of its local components. Thus, this is a particularly fruitful time to consider the determinants of success (or lack thereof) in local economies – hereafter cities – and to consider especially what kinds of things national, state and local governments can do to facilitate broad and equitable economic development.
Deeply embedded in the U.S. system of governance is a partnership between state and local units of government. Heavy mutual reliance upon real estate, income, and sales taxes requires a high level of commitment to communication and coordination between states and their partners in local government At the most basic level, we are all members of a social partnership that aims to deliver, among other benefits, economic development. Economic development, broadly and appropriately construed, translates into improved standards of living and well-being for our citizens. Economic development also generates the resources — fiscal and human — that state and local governments need to do their job.

Stephen Malpezzi

University of Madison Wisconsin

March 29, 2007

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