MPC
Research Projects (2007-08)

Identifying Number

MPC-297

Project Title

Understanding Influence of Transportation and Other Factors on the Economic Growth of Nonmetropolitan Cities

University

North Dakota State University

Project Investigator

Kimberly Vachal

Description of Project Abstract

Depopulation of rural areas is a well-documented migration trend. U.S. Census reports that over one-third of the nation's population lives in nonmetropolitan and rural areas. Considering a population that was located primarily in rural areas in the agrarian age of the early 1900s, the socioeconomic landscape has been transformed over the last century. As population has flowed to both major metropolitan areas and cities in nonmetropolitan areas, the growth of these smaller cities has become critical to economic sustainability in these regions. The economic growth of these nonmetropolitan cities has been largely neglected in economic development literature. Understanding economic growth patterns of these smaller U.S. cities is beneficial in crafting future national economic development policy that continues to weave a geographically diverse and integrated economy.

The growth of small- and medium-sized cities have received limited attention in previous research compared to that of metropolitan cities (Dobkins and Ioannides, 2001; Glaeser et al., 1995; Huang, et al., 1992). Although the existing research does provide valuable insight for nonmetropolitan cities, this research is concerned specifically with city growth in more rural agricultural regions. In additional, it distinguishes the value of competitive transportation service as a factor in economic growth. In addition, the role of transportation in economic growth has been widely debated across the research (Gramlich, 1994; Aschauer 1989; Button, 2000; Chandra and Thompson, 2000). This investigation will explore the growth of these smaller cities during the knowledge age, and specifically highlight the role of transportation in this post-interstate era.

Identifying factors indicative of economic growth in nonmetropolitan over recent decades will provide nonmetropolitan and agricultural areas guidance for making investment and policy decisions to positively affect their cities' economies. These cities offer nonmetropolitan regions the opportunity to derive some form of agglomeration benefits and serve as a critical point of attachment for the region in the larger global economy's transportation and market network. Thus, promoting the region and its market connections in a more holistic fashion may benefit efforts to foster economic growth.

Project Objective

The objective of this research is to identify factors important in the economic growth of nonmetropolitan cities, and specifically in agricultural regions. Several hypotheses will be tested related to the economies and the role of transportation, along with other factors, in their growth. These include:

• Hypothesis I₀: Nonmetropolitan areas experience "brain drain," where human capital is negatively related to the economic growth rates as education enables people to leave nonmetropolitan areas for opportunities in metropolitan areas.
• Hypothesis II₀: Nonmetropolitan cities with specialized economies have more success in growing their economies, as they benefit from division of labor and economies of industry agglomeration.
• Hypothesis III₀: Transportation is a necessary but not sufficient factor in nonmetropolitan economic growth.
• Hypothesis IV₀: The traditionally natural resource-based economies of agrarian region nonmetropolitan areas are not unique, compared to other nonmetropolitan areas, with regard to the roles of industrial specialization, human capital levels, and transportation service, as factors in economic growth during the knowledge age.
  • Sub-Hypothesis IV_0F: Freight transport service - Transportation competition is not a factor in nonmetropolitan economic growth.
  • Sub-Hypothesis IV_0B: Business transport service - Air transport, as a factor in business relationships, does not affect nonmetropolitan economic growth.

Project Approach/Methods

Multivariate regression will be utilized to test the hypotheses regarding the economic growth rates of mesopolitans (Kennedy, 1992; Koo, 1990; Pyndick and Rubinfeld, 1991; Freund and Littell, 2000; Greene, 2002). An ordinary least squares (OLS) model will be constructed to assess the relationship of economic growth, in terms of per capita income change between 1980 and 2000, to static and dynamic factors. The static variables are primary- and secondary-order geographic factors, such as proximity to navigable waterway, interstate highway, airport, and a major urban center. Dynamic variables are associated with technology and human capital factors that include education, industrial mix, transportation service, and agglomeration externalities.

Contributions/Potential Applications of Research

• Deliverable: Research Paper
• Research Paper and Presentation at Regional Science and Transportation Conferences
• Policy Decision Information
• Small and Rural Community Economic-Growth Resource Decisions

Time Duration

July 1, 2007 - June 30, 2008

Yearly and Total Project Cost

$9,200

TRB Keywords

Economic, population, growth, transportation