Cross-border local development policy: an examination of spacial patterns.

• Author: Reese, Laura A.

Abstract

This paper explicitly focuses on the relationship between geography or location and the economic development practices and policies within a community. More specifically, spatial relationships among communities on the Canadian/US border are examined to determine if similar approaches to local economic development can be identified based on spatial patterns regardless of nation of origin. Based on survey and census data in a geographic information system analysis limited national, regional, and state/provincial patterns in policy use are evident depending on the particular economic development policy considered. The lack of consistent patterns, however, directs policy analysis in a local direction to focus primarily on local issues--local structure, local economy, local players, and the local civic culture.

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The literature on why certain cities engage in particular types of economic development techniques tends to be fragmented and often contradictory. It rests primarily on data from US cities, has failed to offer robust explanations of policy practice, and has relied on a relatively stable and limited set of independent variables. These have commonly included political factors (residential or business input, professionalism of decision-makers, decision-making practices), economic/fiscal measures (tax base/rate, economic growth measures, median income of residents, property value), or structural variables (form of government, age of community, inter-city competition). While such research has provided insights into economic development policy processes and current practice, it fails, in a collective sense, to provide a theoretically cohesive explanation of policy and policy outcomes. Research has pointed to several critical factors which appear to impact local economic development practices missing from much current analysis: resources devoted to the economic development enterprise; enabling legislation; professionalism of development officials; the extent of planning and evaluation, and spatial patterns among communities (Reese and Malmer, 1994; Ohren and Reese, 1996; Reese, 1997; Reese, 1998; Reese and Rosenfeld, 1999).

This paper explicitly focuses on this last factor; the relationship between geography or location and the economic development practices and policies within a community. More specifically, spatial relationships among communities on the Canadian/US border will be examined to determine if similar approaches to local economic development can be identified based on spatial patterns regardless of nation of origin. Recent research on cross-border cooperation among European countries and between the US and Canada suggests that boundaries are becoming less important and are being replaced by regional variations (Marks, 1993; Hooghe, 1996, among others). Using Geographic Information System (GIS) analysis along with traditional statistical analyses, the following questions are examined:

* Are spatial patterns evident in the types of economic development policies employed by cities along the Canadian/US border?

* Do proximate communities employ similar "packages" of development incentives?

* Is there more variation within or between nations in the types of policies employed or do policy approaches follow regional rather than national lines?

SPATIAL LOCATION AND ECONOMIC DEVELOPMENT

Geographic Location

To date, there has been a general lack of attention to geographic or spatial patterns in the adoption and use of local economic development policies. Work on the diffusion of local policy innovation from the 1970's provided insights into the spatial dispersion of local policy. However, these findings have generally not been included in more recent work on economic development policy (an exception would be Krmenec, 1989). Local decisions to adopt particular new policies were found to be affected by neighborhood (emulation of policy in cities close by), hierarchy (diffusion from larger/older to smaller/newer cities), and central propagator (encouragement by state or federal policy) effects (see McVoy, 1940; Crain, 1966; Agnew et. al., 1978; Krmenec, 1989, for some examples in different time periods). Indeed, these spatial innovation patterns were found to occur in combination with each other and with other local conditions, creating a:

threshold set of conditions defined in terms of a community's need for the innovation, its level of information, and where relevant, the existence of state enabling legislation. If these conditions are met, the time at which a particular community adopts appears to depend upon its need for the innovation and its political structure (Agnew et. al., 1978: 26). More recent research focusing on location and economic development policy indicates that early adopters of industrial revenue bonds were large, urban, home-rule communities with a secondary neighborhood transmission pattern stimulated by information flows later in the diffusion process (Krmenec, 1989). Local "need" for IRB's indicated by employment, business establishments, and employment patterns appeared not to have as strong an effect on policy adoption as these spatial diffusion patterns. Thus, "space" appeared more important than any individual local characteristics in adopting this particular economic development policy.

Several recent studies of economic development have included limited analysis of spatial effects, although this has tended to be only tangential to the main foci of the analysis. And, partly as a result, findings appear to conflict regarding the importance of geography in "determining" local development policies. For example, research on the adoption of Type II policies found consistent spatial patterns when cities were examined by state. Such policies would include performance guarantees to ensure that the benefits accrue to a locality in return for public incentives or linkage programs or hiring requirements which attempt to direct benefits of economic development to particular groups of residents. Cities emphasizing Type II policies in Ohio and Indiana, for example, tended to be lower income, white communities. Illinois cities using Type II policies were more racially mixed, particularly white/Hispanic. High Type II cities in Pennsylvania, Michigan and New York evidence historic racial change patterns from white to African American with increasing economic stress. Cities using Type II policies in Indiana and Ohio were more economically stable (Reese, 1998). When high Type II cities were plotted, many were "border" communities in that they were either close to a state line, a body of water dividing states, or Canada. Many were within close proximity to other cities of similar size or were suburbs of a central city or the central city in the region (Reese, 1998).

On the other hand, Clarke and Gaile failed to find significant spatial effects in local use of federal economic development programs based on trend surface analysis (1998). Such analysis controls for regional variation in policy use as well as for other variables of interest. They found no statistically significant regional trends in the use of market-based economic development policies, probably because the use of such incentives is widespread. Because this analysis focuses on regions, it is possible that intra-regional trends exist and may be identified through more city-specific GIS analysis.

National Trends

A number of studies have focused on both the similarities and differences among cities in Canada and the US, many examining economic development policies in particular (see Reese and Fasenfest, 1996 for a review of this literature). It was argued in early research that urban systems in the two nations were so inherently different as to be incomparable, primarily as a result of cultural factors (Goldberg and Mercer, 1986) but also due to variation in the role of the state, notions of collective rights, and systems of federalism (Feldman and Graham, 1981; Andrew, 1994; Smart, 1994). However, other researchers have pointed to many similarities in the environment of cities in the two countries which are particularly germane to economic development: manufacturing employment and population loss in central cities (Nathan and Adams, 1989; Randall 1994; Garber and Imbroscio, 1996, among others); economic stresses related to similar shifts to post-industrial economies (Davis and Murdie, 1994; Rothblatt, 1994); and, increasing inter-city conflicts over development and intergovernmental resources (Woodside, 1990; Rothblatt, 1994). In short;

The character of metropolitan development and the institutional response to it in both countries appear to be converging. The trends we have observed do not represent the 'Americanization' of Canadian urban public policy or the 'Canadianization' of United States metropolitan planning, but rather the globalization of urban development and corresponding governmental adaptation (Rothblatt, 1994: 516). Indeed, recent research suggests that cities in the two nations not only share regional and economic characteristics but also share development ideologies, policies, and limited rational planning (Turner and Garber, 1994). While important systemic and cultural differences continue to exist, the globalization of economic production and competition, and the struggle to maintain local tax base and jobs have made economic development a preeminent activity for municipalities in both nations.

To respond to international economic forces and resulting local fiscal stress, cities in Canada practice a variety of economic development techniques similar to those well-documented in the US literature, including financial incentives or inducements (Lorimer, 1972; Whelan, 1989), creation of quasi-public redevelopment corporations (Leo and Fenton, 1990), and direct municipal investment (Artibise, 1988). Although important variations exist between provincial governments, many allow cities to compete...