Collaborative Research: A Strategic Approach to Local Economic Development

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The existing urban politics literature has classified development policies into three types: location incentives that subsidize development; progressive development policies that provide incentives but with strings attached; and growth management restrictions. Unlike most of this extant work which has examined one or at most two of the policy types in isolation, the researchers treat growth policy as a continuum across these types, based on the distribution of the costs and benefits of development among pubic and private actors. The specific deals that cities negotiated with private actors can fall at any point on this continuum, based on the combination of policy instruments used, the concessions and extractions negotiated. Use of the bargaining perspective allows them to unite these separate approaches to city growth issues by focusing on the factors that increase a city's relative bargaining power -- enabling it to make extract benefits from firms or forcing it to provide concessions to attract growth. Applying the Nash bargaining model to development deals also can incorporate insights from previous development research within a more rigorous theoretical framework that leads to a very specific empirical specification. City competition for development is captured by the relative values of the city's and the firm's outside options -- the alternatives each would get if the negotiated deal fell through. City bargaining power will depend on its inherent attractiveness to different businesses, which determines the minimum value it should accept in a deal; its need to reduce economic or fiscal problems, which determines its time preference, and the risk aversion of the political actors negotiating the deal. Identifying the sources of the city's bargaining power will also lead to policy recommendations on how government institutions and general development policies can be structured to improve the city's ability to pursue both short term and long term development goals. The investigators also extend this approach to address repeated play of the bargaining game with different firms over time. This extension permits evaluation of the possibility that cities can develop a reputation as a 'tough' or 'soft' agent, equivalent in development policy to slow- or pro-growth areas. This bargaining approach is investigated through empirical analysis and theoretical modeling. Predictions of the model are tested with data collected from a national survey of development officials in all incorporated places over 10,000 within 12 selected metropolitan areas. The survey gathers information on the two most recent negotiated location incentives deals. This facilitates the measurement of the outcome of the bargaining model-the value of the negotiated agreements. Information on specific firms is collected from archival sources, and matched to bargaining outcomes in the data set. Additional information on city political, fiscal and economic characteristics are merged into the final data set. Fieldwork in the 12 metropolitan areas add details about the negotiation process in practice and data from city records. In addition, interviews with officials involved in formulating development policy and carrying out development negotiations provides the basis for case analyses of development negotiation.The anticipated products of this research represent significant theoretical and methodological advances in the urban politics field, as well as an applied framework for city officials to improve pursuit of their development goals. Given that formal modeling approaches to questions in the urban politics and public policy fields have been limited, the work resulting from this research has the potential to be groundbreaking in its extension of new methodological approaches to these fields.