Chicago Fed on Midwest cities and job growth

The Federal Reserve Bank of Chicago has just published a four-page issue brief entitled “Looking for diamonds in the rust: Midwest cities and job growth.” (Click here to view it.) Along with Iowa City (IA) and Madison (WI), Indianapolis and Elkhart are highlighted as metro areas that have exceeded "expected" job growth. The author makes this interesting observation regarding Elkhart:

"Elkhart is the city in the District with the largest concentration of manufacturing jobs (45% of total employment in 1998–2000), yet remarkably, it still had faster job growth than the national average."

Reading the relatively positive assessment of the Indianapolis economy reminded us of a past blog entry by Chiacgo Fed economist Bill Testa. Testa’s blog is terrific, and you can find it here.

In a November 2005 post entitled “Driving Indiana’s and Michigan’s Economic Performance”, Testa posited that the structure of local government may help explain the very different economic performances of Detroit and Indianapolis.

"Governance structures may also explain some of the challenges. Central city Detroit has been buffeted by job, population, and income flight, with concentrated poverty left in the wake. Detroit city leaders have been unable or unwilling to climb above the city’s fiscal problems to re-build its economy. To what extent has this failure come about because the central city was isolated from the rest of the metropolitan area (and state), and left to solve profound problems with its own (meager) resources?

Indianapolis and other cities have taken some modest steps in consolidating local governance to a closer fit with their metropolitan-wide economies. In the late 1960s, Indianapolis moved toward a “Unigov” structure. As Rick Mattoon discusses (working paper), the city’s boundary was expanded from 82 square miles to 402 square miles, with a legislative body responsible for governing the city. Though there remain many independent governments, taxing authorities, and school districts within the city, the consolidated city has six administrative departments below the mayor’s office.

Other Midwest cities with elements of regional governance include Minneapolis–St. Paul, which has a metropolitan sharing of property tax base. Columbus, Ohio, has not consolidated, yet its central city government has been aggressive in annexing land outward toward its interstate beltway. Both metropolitan economies have outgrown the broader Midwest."

This is a rather interesting proposition: does local government reform and consolidation have a positive impact on economic development? Click here to read the entire piece.