Cities regularly face a wide range of economic development choices that inevitably create both winners and losers within their communities. Proper assessment of the impacts of such choices requires not only an appropriate modelling framework but also explicit understanding and incorporation of a city's income distribution priorities. This paper proposes that a computable general equilibrium (CGE) model, which includes a structured social welfare function, can provide precisely such a tool to fully evaluate economic development choices, tradeoffs and implications. We leverage such a model for a small Colorado city and simulate sector-specific expansionary economic development policies. We apply the framework to understand the gains and losses of two distinct groups, namely original residents versus new arrivals, likely to be affected by such choices, alongside the welfare impacts to the city as whole.JEL classification: R5, H7, O21
The expansion of computer and information technology firms combined with the simultaneous decline in traditional manufacturing firms in the 1990s argues for a re-examination of economic base models in light of changing basic sectors within the economy. This paper reviews the literature and employs an in-depth survey to describe the differences in the pattern of employment for traditional manufacturing firms and the "new economy" firms in Larimer County, Colorado, USA. This study indicates that traditional economic base analysis is not easily applied to communities with "new economy" firms and maintains that a more inclusive and comprehensive survey method remains the best way to adequately capture the essential makeup of a region's economic base.
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