William A. Testa

Headquarters Research and Implications for Local Development

Drawing from both the professional literature and from a conference held at the Federal Reserve Bank of Chicago in 2004, the author summarizes findings and draws implications concerning the locational tendencies of stand-alone headquarters operations. In the United States, the geography of large company headquarters is becoming more dispersed toward medium-sized metropolitan areas even as the headquarters needs for urban infrastructure and amenities continue to sharpen. The location of the firm’s branch plant locations will be critical for many headquarters, so developing a strategy focused on a region’s own industry specializations should be considered. So too, as the organizational structure of firms becomes more complex and globally dispersed, many specialized establishments can be found under the same umbrella, making it imperative for local development practitioners to determine their region’s functional niche.

The Benefit Principle as a Preferred Approach to Taxing Business in the Midwest

State-local tax policies to encourage growth and development have been roundly criticized as detrimental to social welfare. In response, recent proposals have included delimiting the ability of states and localities to fashion tax policies. Not only are such proposals unworkable, but they fail to harness the creative energy and ideas of development practitioners because they act competitively to foster growth and development. The authors propose an alternative basis on which to fashion state-local taxation of business—that is, the so-called benefit principle—which aligns business taxes with costs of government services received by business entities.

Using the REAL Models to Understand Midwest Restructuring

The 1980s and early 1990s were a time of profound restructuring in the Midwest. The region had stood as the nation’s wealthy and progressive manufacturing center for a long-standing century. But the confluence of shocks that took place during this time shook the region’s economy to its foundations—defense spending shocks, farm crisis, foreign competition, and technological change. In turn, these shocks challenged the region’s businesses and policymakers to either change course or to wither away. By the mid-1990s, there was very visible evidence — both statistical and otherwise — that the region had been successful in its transition well beyond the hopes and expectations of majority opinion. Indeed, some observed that such a renaissance was probably unique in the annals of those regions experiencing deep manufacturing decline and decay in the industrial age... so much so that the Midwest’s experiences merited a deeper analysis and understanding as a guide to policy makers both in the Midwest and elsewhere. In cooperation with many analysts drawn from an array of organizations, the Federal Reserve Bank of Chicago organized a two-year project to bring together the best researchers and their work to address the Midwest turnaround. Over the course of the many topical symposiums, it became apparent that the project was fortunate in its inquiries because crucial tools to understand the Midwest turnaround and to guide its policy decisions were under development by the Regional Economics Applications Laboratory (REAL) and its directors—Philip Israilevich and Geoffrey Hewings.

Household Location and Economic Development in the Chicago Metropolitan Statistical Area

The patterns of where households live within the Chicago Metropolitan Statistical Area are examined over the 1990 to 2010 period with respect to their socioeconomic characteristics. It is seen that city–suburban differences in educational attainment have been eliminated over time. This is particularly the case for non-Hispanic Whites living in Chicago who have become substantially more likely to have a college degree relative to their suburban counterparts. In contrast, educational attainment has a rising propensity of African Americans and Hispanics to suburbanize, especially those households containing children of school age.