Summary of Urban Economy Assessment

What is Urban Competitiveness?

In assessing the state of the Urban Economy, Urban Competitiveness is the ability of an urban region to produce and market products when competing with comparable products from other urban regions. Local Economic Development refers to the “New Competitiveness,” or the belief that cities need to develop their own LED strategies to prepare for the benefits and potential negative economic impacts of opening/accessing their markets to the world markets.

The key reason for increasing urban competitiveness is to raise the standard of living for people who live in the urban areas. By increasing the economic productivity of an area and marketing its most productive goods and services, the community can develop and grow at its greatest potential. Economic investment, well targeted and strategically focused, is a proven method for improving the vitality of a community. Given that strong export economies make the city more competitive, it is beneficial for the city to support the export economy of the city. Moreover, if a city increases its competitiveness, the standard of living for the people in the urban region will rise.  

What Categories are Used to Measure Competitiveness?

There are four assessment categories used to measure competitiveness:

§         Economic Structure;

§         Territorial Endowment;

§         Human Resources;

§         Institutional Milieu.

Competitiveness can be measured through various lenses. Each measurement indicates a valuable incentive to invest in the area. If an area rates high in any of these categories, than that category is an asset of that area. These categories are not separate or interchangeable but are mutually necessary for determining urban competitiveness. The following are measurements of competitiveness:

§         Economic structure - economic composition, productivity, output and value added, and investment-foreign and domestic;

§         Territorial endowment - non-tradeables, such as location, infrastructure, natural resources, amenity, cost of living and doing business, and an urban region’s image;

§         Human Resources - extent to which activities in cities can move up value chains;

§         Institutional milieu - business culture.

Implementation Techniques

As indicated above there are four categories to measure competitiveness. Each index is measured using the following measurements:

§         Economic Structure can be determined through variables such as: analysis of output, employment and investment data. There are several technical methods for this analysis, including location quotient, shift-share analysis, economic base analysis, productivity analysis, regional income indicators, investment indicators, etc;

§         Territorial Endowments are measured through hard infrastructure such as: assets of a place, including markets, location and access, infrastructure, amenities, capital and finance, cost structures, and city image;

§         Human Resources are the most important factor in determining the competitiveness of a region. It is measured through education, training, skills, work experience, entrepreneurship, creativity, and risk tolerance;

§         Institutional Milieu is not as easily quantified, but social scientists have defined it by the following: social capital, such as trust, norms, and networks, that can improve the efficiency of society by facilitating coordinated actions. It is evaluated by governance, champion institutions and individuals, networks and interconnectivity, and norms and convention.

Assessment Under Varying Urban Regional Characteristics

§         Assessments need to be modified according to the characteristic of the cities. There is a difference between pre-industrial, industrial versus knowledge economies, intermediate versus large urban regions, transitional cities, crisis cities, etc;

§         The data and amount of time and resources available to conduct the assessment will determine how extensive or thorough the assessment should be.

How is Competitiveness Assessed?

There are three assessment modalities or methods: 

§         Regional economics;

§         Benchmarking;

§         SWOT analysis.

Each assessment method for determining urban competitiveness has its strengths and weaknesses.  The following methods are used by policy experts, local officials, city planners, etc. to measure the status of the city's competitiveness.  As cities constantly change, it is necessary for the measurement method to be dynamic and strategic.

§         Regional economics - focuses on the quantitative analysis of a city region’s economy. Key variables include economic structure and costs of production in differing locations with particular emphasis on transportation and labor costs. The benefits of this method are that it effectively assesses the competitiveness of traditional industries, labor intensive industries, identifies the economic comparative advantage and identifies factor prices. The shortcomings of this method is that it ignores important factors, such as political stability and labor production, and also ignores the contribution of the informal sector; 

§         Benchmarking - identification of comparable mentor cities to format goals and use as vision and guidance. As mentor cities change, the country that is attempting to model the mentor city can dynamically envision the future of its own city. The weakness of this approach is it locates causal relationships between policies, behaviors and outcomes in mentor cities, but is unable to identify means to its desired ends;

§         SWOT analysis - strengths, weaknesses, opportunities and threats. Analysis in the context of strategic planning. The benefits of the SWOT approach is that it does not have a fixed objective and it utilizes many forms of information, such as media reports, interviews, etc. On the negative side, the approach may vary depending on the personnel who oversee it.

Urban Economy Assessment Process

The following is the process to determine urban competitiveness. This process incorporates an analysis of the urban region and the development of a competitive strategy based upon the assessment.

• Step 1 Determine issues and concerns relevant to competitiveness. Does a Mission statement on competitiveness exist?

• Step 2 Conduct stakeholder focus groups on competitiveness of city.

• Step 3  Undertake pattern analysis of economic structure, specialization, labor force, investment.

  - Utilize secondary data;

  - Time series;     

  - Review surveys of informal sector.

• Step 4 Identify comparable cities for benchmarking purposes.

• Step 5 Undertake analysis of local endowments, e.g., location, infrastructure, amenities.

• Step 6 Identify pillars of economic strength (specialization, clusters, etc.).

• Step 7 Assess external drivers affecting city: opportunities and threats:

  - Scenarios formulation;

  - Domestic, regional, global.

• Step 8 Assess internal strengths and weaknesses:

  - Networks, institutions, champions;

  - Identify levers that city controls and focus on these; often amenity and infrastructure;

  - Undertake surveys, focusing on: key firms and institutions;

  - Individuals with influence.

• Step 9  Identify realistic competitive strengths and weaknesses

• Step 10 Develop competitive strategy (i.e. investment driven export base)

• Step 11 Establish benchmarks, policy indicators, and monitoring mechanisms

Future

In order to increase the positive impact born from implementing good practices and increasing marginal productivity within the urban context, the current methods of analysis needs additional development.  By increasing the range and the depth of evaluation of the current indexes, and developing new measurement methodologies, developing country urban regions will be able to progress and develop to meet the challenges economic growth in the 21st century. The following are ways to develop the urban competitiveness assessment analysis:

§         Refocus competitiveness analysis on sub-national units;

§         There is a need for guidelines, manuals, and best practice summaries on urban economic assessment/competitiveness profiling for developing cities;

§         Develop methods to assess institutional/cultural milieus;

§         Assess the value of informal sector;

§         Survey current competitiveness profiling in developing cities;

§         Need to develop approach and technique to assess the urban competitiveness of developing country urban regions.

Source

Douglas Webster and Larissa Muller. (2000).   Urban Competitiveness Assessment in Developing Country Urban Regions: The Road Forward  PDF, Paper Prepared for Urban Group, INFUD, The World Bank, Washington D.C., July 17.

Back to top