In support of the mission of the University of Wyoming, the Department of Agricultural and Applied Economics and the Cooperative Extension Service conduct
research in the area of Community Economic Development and analysis. These pages introduce the subject and provide a brief overview of our work as well as
being a starting point for further discovery on the topic.
What is Economic Development?
The concept of economic development is often misunderstood. Many times the term is confused with economic growth to define any
type of money generating activity in the community. To further cloud the issue, there is no one prescription for economic development that will full-fill the needs
of all communities. Successful economic development is a process that fills different needs for different communities at different times. Its success is often case
specific, depending on the development goals, implementation and funding resources available. Communities need to thoroughly understand the process before
jumping onto the economic development bandwagon. The results of misunderstanding the process can be misunderstanding by the community and political
gridlock in the bureaucracy.
Economic development can be defined as "a sustained community effort to improve both the local economy and the quality of life by building the area's capacity to
adapt to economic change" (Loveridge and Morse). This definition suggests a distinction between economic growth and economic development. Economic growth
represents an increase in jobs and income in the community. It refers to the expansion of total economic activity in the community. While economic
development can involve job and income growth, it also involves sustainable increases in the productivity of individuals, businesses and resources to increase the
overall well being of residents and maintaining or even enhancing the quality of life. Economic development refers to the enhancement of economic activity in the
community. Economic growth is generally a short run concept while economic development is a long term commitment. To illustrate this point, say there are an
increasing number of jobs in a local economy. This may represent economic growth, but if the new jobs do not pay wages that residents can afford to live on, the
growth may not represent economic development . However, this short run economic growth could also be a short run objective of a long-term plan of economic
The Role of Community Economic Analysis
This is the starting point in the economic development process. Community economic analysis is the process whereby a community examines the economic aspects
of its structure in order to determine the further steps of the development process. In deciding that economic development should be pursued, policy makers should
look at their local economy and answer the following questions:
- Where are we now?
- Where do we want to be?
- Why aren't we there now?
- What needs to be done to get us there?
- Who is going to get us there?
- When is it going to be done?
- How will we know when we get there?
The role of the economist in the economic development process is to provide technical expertise to the community in understanding the structure of the economy.
Strategies for Community Economic Development
In answering the above questions, the community will need to select a strategy (or strategies) on which to focus its efforts. The strategies a community selects for its
economic development effort depends on the goals, values and resources available to the community. There are five general categories of strategies for local
community economic development (Pulver).
Improve Efficiency of Existing Firms: As firms become more efficient, they become more competitive in the regional, state and national markets. The
greater their efficiency, the more revenue they can bring into the local economy. In addition, the ability to stay competitive is a firm's best guarantee of being able to
stay in business and expand. Efficiency is just as important to firms industries with declining employment. The most efficient firm can survive the longest. An example
of a community action to assist businesses in improving their efficiency would be organizing educational programs to strengthen the management capabilities of existing
Improve Ability to Retain and Capture Dollars: In every community, self employed individuals, workers, retirees and businesses of all types control
substantial amounts of money with which they make purchases. Every one of these dollars spent in the community adds to the community's employment and income.
At least some of these dollars will be re-spent in the community adding additional employment and income. In contrast, dollars spent outside the community do not add
to the community's employment and income. From another perspective, thousands of people pass by most communities on highways or to visit nearby tourist attractions
each year. The dollars spent locally by nonresidents can be as valuable to the local economy as those generated by the exports of raw materials or manufactured goods.
Improving the community's ability to retain local expenditures and capture nonresident dollars will enhance the local economy. Examples of community actions to improve
retention and capture dollars include: a) Surveying consumer needs and buying habits to identify market potential, and b) Developing appropriate promotion and advertising
programs to generate more purchases by non-local people.
Attract New Basic Employers: In order to initiate economic activity, a community needs to have some businesses that bring in outside revenues through the
sale of their products or services outside of the local economy (basic employers). Attracting new basic employers will not only add employment and income directly to the
local economy, but also indirectly through re-spending with other local businesses. Basic employers can include manufacturers, tourism attractions, financial firms, computer
services, warehouses and state and federal government agencies. An example of a community action to assist in attracting new basic employers would be developing
inventories of local industrial, office and commercial sites along with information on public services and available labor.
Encourage Business Formation: There is a continuing need for new businesses to meet the changing demands resulting from population growth or evolving
goods and services (video recorder, outpatient care or fast food for example). A new business start-up can mean new income and employment as well as expanded trade with
other local businesses. It can also capture sales that might otherwise go to other communities. An example of a community action to assist in business formation is to provide
counseling and intensive education for those interested in forming new businesses.
Increase State and Local Funding: A community may want to strive to get back some of the dollars taxed away by the state and federal government and perhaps
acquire tax dollars from other areas of the state or nation. State and federal agencies can be major employers providing good paying jobs. In addition, they have a variety of
programs that provide funding to local governments and residents. Social security, Medicare and Medicaid payments are major sources of personal income in most communities.
Communities may want to at least be aware of the importance of state and federal government funding to their local economy and consider the potential for expanding this funding.
An example of a community action to increase state and federal government revenues is developing procedures to actively monitor government programs to obtain assistance
whenever it is appropriate.
A Toolbox for Community Economic Development
In community economic development, the regional economist has at his/her disposal a set of tools to analyze the regional economy to determine the economic development needs of the community. These tools include:
Impact models: Can be constructed on the county, regional, state or level national. Models show how dollars flow through the economy and the impact in a change in the level of economic activity.
Budgeting for public services: Changes in the level of economic activity will result in changes in demand for public services. Budgeting can be used to forecast changes in costs.
Business retention and expansion: These programs can target specific businesses to retained or expanded in a region.
Industry targeting: Communities can select what types of businesses that they would like to attract and make the resources available to them.
Commonly Used Terms in Community Economic Development
Community - A group of people in the same geographic location with specific geographic, demographic or social boundaries.
Community Economic Analysis - "examines how a community is put together economically and how it responds to external and internal stimuli". (Shaffer)
Development - is a fluid concept that incorporates the existing resources base of the local economy and its level of change over time. Another term, closely linked to development is
"vitality" which is used to describe the ability of a communities level of development to adapt to outside change.
Economic Development - "is the sustained, progressive attempt to attain individual and group interests through expanded, intensified and adjusted use of available resources." (Shaffer)
Economic Growth - is more economic activity, but that does not always mean that the activity is sustainable. Economic growth can occur with less economic activity.
Resources - Inputs or commodities used production to be transformed into outputs. Resources can be social, political, economic or physical.
Pulver, Glen C., "Community Economic Development Strategies" University of Wisconsin Extension, Cooperative Extension Service, Madison, Wisconsin, Bulletin G3366
Shaffer, Ron. "Community Economics, Economic Structure and Change in Smaller Communities", Iowa State University Press, Ames, Iowa, 1989
U.S. Dept. of Commerce, Bureau of Economic Analysis, Regional Economic Information System (REIS) 1969-1997 on CD-ROM.