Community Economic Development
Economic growth is a long term expansion of a country’s productive potential. It is the increase in the market value of goods and services produced by an economy over time. It is conventionally measured as a percentage increase in real Gross Domestic Product. In addition, economic growth improves the living standards. This is measured as an increase in real income per head of the population. Furthermore, economic growth stimulates more jobs to help people as they enter the labour market (Weil, 2005).
Conversely, economic development can be defined as the effort that seeks to improve the economic well being and quality of life for the community by creating jobs and coming up with new innovations. It is the development of the well being of the country’s inhabitants. In addition, economic development can also be measured in terms of improved living standards (Todaro & Smith, 2012). Improved living standards also result to better life choices, morality freedom from oppression and self esteem. Contrary to the common that belief that economic development is increasing of income and jobs, economic development also entails the creation of new opportunities and also environmental conservation.
Although these concepts have been extensively interchanged, economic development and economic growth are two different factors. Economic growth does not entail the entire country (Todaro & Smith, 2012). However, economic development reflects the development of all citizens. Development is the change experience by the citizen, for instance, improved shelter, employment and so on (Weil, 2005). Economic growth reflects and affects sustainability. This means that while meeting the current economic growth needs, future needs should not be compromised. In this case, environmental effects are now a government problem. Economic development and Economic growth are not identical, although they actually entail the improvement of personal and national standards.
| Economic Growth | Economic Development | |
| Implications | Economic growth can be defined as the real services and products out put in the entire country. | This entails the development of the citizens living in the country. In addition, this focuses on the both the economic and social aspect of the community. |
| Factors | Factors include investment, consumption, GDP, government spending rates.
Entail the improvement of the entire nation. |
This entail personal development, poverty rate decrease, rise in education standards, increased health of the community and decreased inequality rates. |
| Effects | Changes the economy quantitatively. | Changes the economy quantitatively and qualitatively. |
| Relevance | Economic growth is considered relevant because it involves the entire country’s economic achievement. Developing nations are evaluated by their economic growth. Economic growth reflects and affects sustainability | The quality of life in developing countries can be accessed through the economic development. Economic development can also be measured in terms of improved living standards. |
| Measurement | This only refers to quantitative rates. For instance, the GDP. | This entail qualitative rates such as; HPI (Human poverty index), mortality rates, fatality rates, qualitative rates, literacy rates. |
| Concept | The concept is narrow. | Normative concept |
Agglomeration economies
Agglomeration economies refer to advantages that accrue when individuals and firms situate themselves close to one another either in industrial clusters or in cities. These benefits come mainly as a result of a reduction in the costs of production such as transportation, communication costs among others. Firms can be related through input or output .firms related through input are those which use the same inputs in their production process whereas those related through output are those that serve the same population.
Agglomeration economies can be grouped into;
- Urbanization economies-these are cost reductions to economic activities in an area due to the large labor markets, demand by consumers and the support services.
- Localization economies –these are the savings to a firm in a given sector that arise since firms that produce the inputs and services it requires may situate themselves within the same place as a result of the demand, therefore, leading to cost reduction and also enhance communication activities and innovation.
How agglomeration affects growth and location of economic activity on the economic plane
Firms will cluster together and hence lead to the development of urban centers. The extent to which a particular urban centre achieves economic growth varies since some will grow as steadily while others will have stunted growth. The agglomeration economies which constitute reduction of costs of production in the various sectors will influence the revenue of the firms and in turn influence its growth and influence the decision of other of other firms to locate within that region. However, some of the competitive advantages as a result of agglomeration may be relevant to just a particular kind of economic activity or sector and irrelevant to others. The combination of economic activities for which a given urban area provides a competitive edge will influence whether there will be growth and firms will locate themselves in this area.
According to Beeson (1992) productivity would be highest in the biggest metropolitan regions. Glaeser (2001) states that as the size of the metropolitan area doubled in the year 1980 the wages increased by 5.1%by the year 1990, the wages increased by 8.2% as the population in each metropolitan area doubled. Wolman (1988) models growth in metropolitan area between the 1year 977 and 1984 among 37 industrial sectors. He notes that the size of the area in the year 1977 was significant in 32 sectors in influencing growth of the sector, in the period. They explain this as proof of localization economies in the regions
How does agglomeration relate to economic clustering?
- Input externalities: if producers in a particular industry are concentrated in a given place, it provides an incentive for the producers of their inputs to situate themselves close by, hence lead to the generation of agglomerate economies and in turn clustering of firms.
Externalities in the labor market- clustering of industries enhance the development of special workers pools that attain skills required by the firm. This leads to clustering. Further, clusters could enhance the performance of the labor market.
How does economic growth affect land values in regions adjacent to rapidly growing communities?
Land is a critical factor of production and must be treated as such. In rapidly growing communities such as most of the Asian countries, there is rapid population growth. This exponential increase of the number of people in the region creates economic growth due to availability of labor. With adequate opportunities, economic growth directly corresponds with the population growth. In case there are minimal or no opportunities, others will be created through processes such as industrialization. Economic and population growth thus puts pressure on available resources land being one of them.
At the urban areas, land is depleted, and the adjacent areas will be the new target. Due to very high demand of land prices will be raised. The first few buyers will get the land at inflated but friendly prices but when the supply of land in the areas cannot meet its demand, there will be a “bubble” in the land market. In this case, the speculation on land prices will emerge and thus prices over quoted (Cheshire and Sheppard, 2002). The inflated prices of land result selling of land at prices that are beyond their productive value.
Globalization also plays a critical role in the land value and prices. When economic development is realized, more people are attracted to areas with potential to grow. This economic growth potential triggers population growth which needs land. Due to high demand experienced, the value of the land in the region and the adjacent area will increase (Wu, 2006). The higher the demand, the higher the value will increase. The lower the supply to high demand, the higher the value of the land and speculation.
Natural economic process and Sprawl
It is important to define a natural economic process in order to understand sprawl. A natural economic process encompasses the actions, activities and operation that are responsible for the production of goods and services. Production of services and goods also entails exploitation of natural resources and raw materials (Hough, 1995).
This include processing of inputs (upstream value) value chain (internal operations), downstream value (customer relations). Process input is related to transactions between the components supporting the exchange and movement of goods and services through the various value chains and value, such as ordering and pricing, tracking and delivery, and product support (Ortiz & Lees, 1992).
Natural economic process can be critical in increasing economies of scale, enhanced competitive opportunities and scope for the emerging customer relationships. The relationship between the value chain and competitive scope offers the foundation for defining relevant boundaries of an organization. Because of this, organization must weigh the gains or intermediation and disintermediation (Ortiz & Lees, 1992)..
With this in mind, sprawl cannot be considered as a natural economic process. This is because sprawl does not fit the category of useful activities that result to production of services and products. According to Duany et al. (2000), the practice of sprawl causes detrimental effects to the environment. Although it is practiced to as a measure to increase economic growth, Duany et al. (2000) asserts that this practice has caused pollution and traffic fatalities.
Hough (1995) also notes that the natural economic process aims at providing the consumer the best services and products. However, sprawl is a result of court orders that do not consider the needs of the consumer. Sprawl results to over exploitation of natural resources and raw materials. This practice is a disadvantageous natural economic process.
In conclusion, economic growth is a long term expansion of a country’s productive potential. It is the increase in the market value of goods and services produced by an economy over time. Contrary to the common that belief that economic development is increasing of income and jobs, economic development also entails the creation of new opportunities and also environmental conservation.
References
Beeson, Patrick 1992. Agglomeration Economies and Productivity Growth. In Edwin Mills and John McDonald (eds.). Sources of Metropolitan Growth. New Brunswick, NJ.Center for Urban Policy Research.
Cheshire, P., and Sheppard, S. (2002).The welfare economics of land use planning. Journal of Urban Economics, 52, 242–69.
Duany, A., Duany, A., Zyberk, E., Zyberk, E., Speck, J., & Speck, J. (2000). Suburban nation: the rise of sprawl and the decline of the American Dream. New York: North Point Press.
Glaeser, Edward. 1998. Are Cities Dying? Journal of Economic Perspectives. Vol. 12
(2): 139-160.
Hough, M. (1995). Cities and natural process. London: Routledge.
Ortiz, S., & Lees, S. H. (1992). Understanding economic process. Lanham: University Press of America.
Todaro, M. P., & Smith, S. C. (2012). Economic development (11th ed.). Boston, Mass.: Addison-Wesley.
Weil, D. N. (2005). Economic growth. Boston: Addison-Wesley.
Wolman, H. with Spitzley, D. 1998. The Politics of Local Economic Development. Economic
Development Quarterly. Vol. 10 (2) pp. 115-150
Wu, J. (2006). Environmental amenities, urban sprawl, and community characteristics. Journal of Environmental Economics and Management, 52, 527–547.
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