Eds and Meds as a metropolitan economic development strategy

12.21.11 | Brown University recently opened a $45 million medical school in downtown Providence, RI, in an old jewelry factor three miles from its campus headquarters—a very telling and smart move. It’s telling because the medical school is filling the space of a declining industry (manufacturing) with two growth sectors—education and health care, or “eds and meds.” It’s a smart move because both have been shown to spark larger economic development for a metro area.

How smart?

In “Urban and Regional Policy and Its Effects,” an edited volume by Margery Turner and BRR Network members Howard Wial and Harold Wolman, Timothy Bartik and George Erickcek find that both fields increase an overall metro area’s income levels considerably, although meds fields have about twice the effect as eds.

As they write in their chapter, “’Eds and Meds’” and Metropolitan Economic Development,”

A policy that attempted to expand a metropolitans’ eds capacity by 50%, or about 1.2% of total local employment, is estimated to increase average earnings of the original residents after ten years by 0.3%. [not counting R&D spillover effects]. …

A policy that attempted to expand a metropolitans’ meds capacity by 50%, or about 4.5% of total local employment, is estimated to increase average earnings of the original residents after ten years by 0.6%. [not counting R&D spillover effects]

So which metro areas have the most existing potential? The authors rank metro areas by the concentration of employment in these two sectors, using an “employment location quotient” (the numbers in parentheses below). In the list below, in State College, PA, for example, the metro area’s share of employment in education is eight times the national average.

Top 10 metro areas with highest concentration of educational institutions

  1. State College, PA (8.2)
  2. Champaign-Urbana, Rantoul, IL (7.7)
  3. Bryan-College Station, TX (7.2)
  4. Bloomington, IN (7.1)
  5. Iowa City, IA (6.6)
  6. Gainesville, FL (5.9)
  7. Lafayette, IN (5.4)
  8. Columbia, MO (5.4)
  9. Athens, GA (4.9
  10. Charlottesville, VA (4.4)

Top 10 metro areas with highest concentration of medical institutions

  1. Rochester, MN (3.1)
  2. Alexandria, LA (1.9)
  3. Iowa City, IA (1.8)
  4. Columbia, MO (1.6)
  5. Waterbury, CT (1.5)
  6. Duluth-Superior, MN (1.5)
  7. Punta Gorda, FL (1.5)
  8. Gainesville, FL (1.5)
  9. Sharon, PA (1.4)
  10. Asheville, NC (1.4)

The residents in these metro areas, as well as many others, are poised to benefit from the concentration of meds and eds in their hometowns. Eds and meds, for example, can boost local earnings by creating an export industry (bringing in dollars that would otherwise go elsewhere). Universities, for example, bring in students from outside the area who spend money in the metro area. The industries could also boost the local economy by raising the education levels or health of local residents, which have been shown to raise earnings. The research coming out of both sectors could be used to create new products and services, creating more jobs. Finally, the clout that these larger employers wield can help increase wages, benefits, and working conditions for residents in the area.

The economic impacts are clearly worth a second look. To spur economic development in metro areas, the authors suggest that policymakers consider building new higher education institutions, expand existing, or encourage expansion by subsidizing tuition, and consolidate or decentralize higher education services across the state. For meds, they suggest states and localities “could subsidize or constrain the expansion of health care institutions either directly or indirectly through the details of health care programs such as Medicaid.”

The book has several interesting chapters that are a must-read for urban policymakers and planners. And if you hurry, you could still snag a copy as a stocking stuffer or Hanukah gift for your favorite urban planning wonk. It’s a 3-volume set even! Game on, Santa.

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