Content area
Full Text
Economic development means different things to different people. To some people, a new shopping center in the community is economic development. Certainly real estate developers would be inclined to include shopping centers in their definition of economic development. If a new shopping center "creates jobs" in the tenant stores, does this not count as economic development just like anew manufacturing firm moving into town?
The answer to this question depends on one's definition of economic development. A new shopping center certainly generates construction jobs and income, and conveys a sense of growth and prosperity. But does a new shopping center meet the more rigorous definition of economic development which includes the creation of permanent new jobs and income in the community? The answer to this question is maybe. Depending on the situation, retail development can create permanent new jobs and income in a community, or it can simply redistribute income which is already present in the community with very little net impact.
This article identifies a basic litmus test to answer the question of when retail "counts" as economic development. To lay the groundwork for this discussion, however, it is helpful to review briefly how local economies function. The economic base model of local economic activity is presented as a simple yet effective tool to analyze local economies. The article concludes with examples of retail activities which clearly count as economic development by creating permanent jobs and income.(1)
REGIONAL GROWTH
There has been a great deal of research and debate among scholars and practitioners over the past few decades concerning the determinants of regional growth and development.(2) In the most basic formulation, regional growth can be analyzed through the "Keynesian" model taught in Economics 101 which postulates that regional (or national) income and economic activity can be divided up into the following components:
* Purchases of local goods by private individuals in the area (consumption);
* Purchases of local goods by private businesses in the area (investment);
* Purchases of local goods by government organizations in the area; and
* Net purchases of local goods by individuals, businesses, or governments outside of the area (net exports).
In this simple model, income and jobs in a region can grow if area households start saving less...