Assessing City Economic Performance: The City Economic Capacity Index SIPA Capstone Workshop – Spring 2013 Faculty Advisor: Professor Ester Fuchs Authors: Alexander Foard, Bingling Liao, Bruno Carneiro, Daniel Mikhailov, Elisa Dumitrescu, James Rorimer, Jenna Tatum, Krisztian Simon, Larry Lom, Yan Zhang Client: Peter Marber, Chief Business Strategist, Emerging Markets at HSBC Global Asset Management Table of Contents Executive Summary ................................................................................................................................................ 7 Introduction .............................................................................................................................................................. 9 Governance, Policy and Economic Performance ...................................................................................... 9 Why Focus on Cities? ................................................................................................................................... 9 What is Local Policy? ................................................................................................................................. 11 Review of the Literature ............................................................................................................................... 11 Scholarship on Cities and Economic Performance ........................................................................... 11 Competitiveness/Doing Business Indices ............................................................................................ 14 Summary of Literature and Indices ....................................................................................................... 17 Research Objective ......................................................................................................................................... 18 Local Governance and the City Economic Capacity Index .............................................................. 19 Why case studies? ...................................................................................................................................... 19 Methodology: Building the City Economic Capacity Index for Economic Performance. ................ 21 Economic Performance ................................................................................................................................. 21 Conceptual Model ........................................................................................................................................... 22 Question 1: Analytical Tools .................................................................................................................... 23 Question 2: Influence on Economic Performance ............................................................................ 23 Data ..................................................................................................................................................................... 24 Sources .......................................................................................................................................................... 24 Collection ...................................................................................................................................................... 25 Variables ........................................................................................................................................................ 25 Index Construction and Reliability ........................................................................................................ 26 Key Results and Findings of data analysis and CEC Index ........................................................................ 28 Summary of Statistics .................................................................................................................................... 28 Construction of the CEC Index..................................................................................................................... 28 CEC Index on Economic Performance ....................................................................................................... 30 City Case Studies .................................................................................................................................................. 35 Introduction ...................................................................................................................................................... 35 Summary of Case Study Findings................................................................................................................ 36 Note on Visual Representations of CEC scores ...................................................................................... 38 TEL AVIV: CEC Index Ranking #1 ...................................................................................................................... 40 City Economic Capacity Score Analysis ..................................................................................................... 40 Economic Condition ....................................................................................................................................... 41 Governance Structure and Budget ............................................................................................................ 41 Local Policy ........................................................................................................................................................ 43 Local Policy #1: Human Capital – Immigration .................................................................................. 43 Local Policy #2: Physical Infrastructure – Transportation .............................................................. 45 Local Policy #3: Livability – Housing ...................................................................................................... 45 Local Policy #4: Business Environment – High Tech Economy ...................................................... 46 Implications ....................................................................................................................................................... 47 CLEVELAND: CEC Index Ranking #2................................................................................................................. 49 City Economic Capacity Score Analysis ..................................................................................................... 49 Economic Condition ....................................................................................................................................... 49 Governance Structure and Budget ............................................................................................................ 51 Local Policy ........................................................................................................................................................ 51 Local Policy #1: Human Capital – Education....................................................................................... 51 Local Policy #2: Livability – Crime .......................................................................................................... 52 Local Policy #3: Business Environment – Economic Development .............................................. 52 Implications ....................................................................................................................................................... 53 SAN JOSE: CEC Index Ranking #3 ..................................................................................................................... 54 City Economic Capacity Score Analysis ..................................................................................................... 54 Economic Condition ....................................................................................................................................... 54 Governance Structure and Budget ............................................................................................................ 55 Local Policy ........................................................................................................................................................ 57 Local Policy #1: Human Capital – Immigration .................................................................................. 57 Local Policy #2: Physical Infrastructure – Transportation .............................................................. 57 Local Policy #3: Livability – Downtown Redevelopment ................................................................ 58 Local Policy #4: Business Environment – Global Networks ........................................................... 60 Implications ....................................................................................................................................................... 62 NEW YORK CITY: CEC Index Ranking #4 ........................................................................................................ 63 City Economic Capacity Score Analysis ..................................................................................................... 63 Economic Condition ....................................................................................................................................... 63 Governance Structure and Budget ...........................................................................................................