Long-Run Growth Dynamics of British Cities and Their Role in the Economy
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Long-Run Growth Dynamics of British Cities and their Role in the Economy Benjamin Charles Gardiner St. Catharine’s College Department of Geography University of Cambridge This Dissertation is submitted for the degree of Doctor of Philosophy October 2019 Declaration This dissertation is the result of my own work and includes nothing which is the outcome of work done in collaboration, except as declared in the Introduction and specified in the text. It is not substantially the same as any that I have submitted, or, is being concurrently submitted for a degree or diploma or other qualification at the University of Cambridge or any other University or similar institution. I further state that no substantial part of my dissertation has already been submitted, or, is being concurrently submitted for any such degree, diploma or other qualification at the University of Cambridge or any other University or similar institution. It does not exceed the prescribed word limit of 80,000 words. Ben Gardiner October 2019 2 Summary of the Dissertation: Long-Run Growth Dynamics of British Cities and their Role in the Economy This thesis examines the economic development and evolution of British cities since the 1970s. Outside of the introduction and conclusion, it is comprised of six papers, most published jointly as journal articles through work on two ESRC-funded projects, How Regions React to Recession: Resilience, Hysteresis and Long Run Impacts (Grant ES/1035811/1) and Structural Transformation, Adaptability and City Economic Evolutions (Grant ES/N006135/1). What binds the papers together, aside from their focus on different aspects of the development of British cities, is a database constructed to undertake the empirical analysis. The cities covered by the research are defined as a set of (high-population) Travel-To-Work- Areas, which are functional labour market areas defined on commuting boundaries and thresholds. What makes the database unique is both its extensive time dimension, and the range of economic indicators that have been developed to underpin the different dimensions of the research, each of which is addressed in the following chapters. Growing Apart - Structural Transformation and the Uneven Development of British Cities summarises how cities have evolved since the 1970s, and the role that sectoral change has had in their growth and decline. Reviving the ‘Northern Powerhouse’ and Spatially Rebalancing the British Economy discusses the role of cities in the ‘north-south divide’ and the emerging policies to address the perceived under-performance of northern cities. The City Dimension of the Productivity Growth Puzzle looks at the national productivity slowdown through a city lens, in particular the role played by structural change. In Search of the Skilled City investigates the role of human capital in cities and how high-skilled labour is linked to different types and geographies of urban development. Finally, The Resilience of Cities to Economic Shocks examines how cities have responded in times of recession, and how this affects their long-run performance, before looking forward to the potential impact of Brexit as the next shock on the horizon. 3 Acknowledgements The research for this work was undertaken as part of three projects, while I was a research associate within the Department of Geography, University of Cambridge: (i) Work commissioned as part of the UK Government’s Office for Science Foresight Future of Cities project. (ii) ESRC (Grant ES/1035811/1) - How Regions React to Recession: Resilience, Hysteresis and Long Run Impacts. (iii) ESRC (Grant ES/N006135/1) - Structural Transformation, Adaptability and City Economic Evolutions. During the course of these projects, and my own research, I have been extremely grateful for the collaboration with team members, particularly my supervisor Professor Ron Martin and his colleague Professor Pete Tyler of University of Cambridge. Also Professor Andy Pike of the University of Newcastle, Professor Peter Sunley and Dr Emil Evenhuis of University of Southampton, and Professor David Bailey (University of Birmingham). Ben Gardiner October 2019 4 Contents Page 1 Introduction 7 1.1 Motivation and Context 7 1.2 Objectives of the Research 14 1.3 Overview of the Research 17 1.4 Remaining Chapters 26 2 A City-Level Database of Long Run Economic Change in Great Britain 27 2.1 Introduction 27 2.2 Alternative Methods for Defining a City 27 2.3 Constructing a Travel-To-Work-Area Dataset for Great Britain 33 2.4 Comparisons with Other (city) Datasets 39 2.5 Applications of the TTWA Dataset 44 2.6 Conclusions and Directions for Future Research 47 3 Structural Transformation and the Uneven Development of British Cities 50 3.1 Introduction 50 3.2 Structural transformation and city growth 52 3.3 City Growth Evolutions 57 3.4 Structural Transformation in the British Economy 61 3.5 Structural Transformation in British cities 66 3.6 Contribution of Structural Factors to the Growth of British Cities 75 3.7 Implications of Structural Transformation in British Cities for Employment 80 3.8 Conclusions 84 4 Reviving the ‘Northern Powerhouse’ and Spatially Rebalancing the British Economy 88 4.1 Introduction: The Rhetoric of Britain’s Spatially Unbalanced Economy 88 4.2 The Long-standing Nature of Britain’s Spatially Unbalanced Economy 92 4.3 The Recent Economic Performance of Major Northern Powerhouse Cities 96 4.4 The Collapse of an Export Base 101 4.5 Why has Spatial Economic Imbalance been so Persistent? 108 4.6 Conclusion: What is to be Done? 113 5 The City Dimension of the Productivity Growth Puzzle 116 5 5.1 Introduction 116 5.2 Labour Productivity Growth Paths of British Cities 119 5.3 Structural Change and Productivity Growth 125 5.4 The Changing Economic Structure of British Cities 128 5.5 Structural Change and Productivity Growth Across British Cities 134 5.6 Between-City Differences in Within-Sector Productivity Growth 139 5.7 Conclusions and Implications 147 6 In Search of the Skilled City 150 6.1 Introduction 150 6.2 The Rise of the ‘Skilled City’ 151 6.3 Measuring Skills and Defining Occupations 154 6.4 High Skilled Occupations and Urban Economic Growth 158 6.5 Occupational Divergence across Cities? 162 6.6 Occupational Polarisation in British Cities 167 6.7 Conclusions 171 7 The Resilience of Cities to Economic Shocks 173 7.1 Introduction 173 7.2 A Tale of Four Recessions 176 7.3 A Resilience Perspective on Recessionary Shocks 178 7.4 The Resilience of British Cities to Four Recessions 182 7.5 Why Might Cities Differ in Economic Resilience? 190 7.6 How Will Brexit Impact British Cities? 202 7.7 Some Conclusions 207 8 Conclusions 209 8.1 Introduction 209 8.2 Main Findings from the Papers 209 8.3 Linking Main Findings and Objectives 214 8.4 Further Areas of Research 222 8.5 Implications for Policy 226 9 Bibliography 232 Appendix A: Data Definitions 262 Appendix B: Chapter 6 Technical Results 266 Appendix C: Chapter 7 Additional Figures 267 6 1 Introduction ‘As is commonly the case with the geography of a complex economic unit, the present makes no sense until it is related to the evolutionary process which has produced it’ (Peter Hall, 1962). ‘Macroeconomics - large scale economics - is a shambles. Nations are not the basic, salient entities of economic life, nor are they particularly useful for probing the mysteries of economic structure, the reason for the rise and decline of wealth. Cities, not nations, are the true engines of economic progress’ (Jane Jacobs, 1984). ‘The economy as a whole is simply too big, too remote from ordinary experience, to grasp. Is there any piece of the economy that can truly help us understand the whole? I suggest a somewhat unusual answer, but one that is growing in popularity amongst economists: that a particularly good way to understand the economy is by studying cities’ (Paul Krugman, 1996). 1.1 Motivation and Context Academic perspective It is difficult to underestimate the degree to which interest in city-level economic development and political devolution has increased over the past decade. Cities and urban areas are seen as the primary sources of wealth creation and the centres from which competitive advantage and productivity gains can accrue through agglomeration economies. In academia, within the overlapping subfields of urban economics, regional science and the ‘new economic geography’, a vast body of literature now exists that explores the importance of the external economies and increasing returns effects that arise from the concentration of economic activity (firms, workers and consumers) in cities, and the positive impact of that concentration on productivity, innovation and wages. A substantial part of this work is theoretical and involves formal mathematical models; but it has also stimulated an expanding body of empirical enquiry, although this remains somewhat limited in many countries partly due to data limitations and definitional ambiguities. Over the past few years, cities and city-regions have assumed growing prominence in discussions over economic growth, performance, and prosperity. Both geographers and economists point to the increasing concentration of economic activity and wealth creation in cities, and their crucial importance as the loci of national prosperity (Florida, 2008; Scott, 7 2001; Glaeser, 2009, 2012; Storper, 2013; Storper et al, 2015). National governments and international bodies have likewise recognized the key economic role that cities play, and have correspondingly directed attention to cities as the foci of policy intervention and governance reform (for example, OECD, 2015; European Commission, 2016; World Bank, 2008; Office of the Deputy Prime Minister, 2006). Cities have come to dominate how we think about economies. But, as some studies demonstrate, not all cities have enjoyed economic success in recent years, (Dijkstra et al 2013; Parkinson, 2013), and some evidence points to an increasing divergence in economic growth between cities, especially in the United States (Hobor, 2013; Moretti, 2013; Kemeny and Storper, 2014).