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Divergent Urban Economic Development: Reflections on a Tale of Two Cities

It would be difficult to exaggerate the recent surge of interest from both academics and policy-makers in cities, and their role as key centres of economic activity and wealth creation. Within the overlapping subfields of urban economics, regional science and the ‘new economic geography’, a vast body of literature now exists that explores the importance of the external economies and increasing returns effects that arise from the concentration of economic activity (firms, workers and consumers) in cities, and the positive impact of that concentration on productivity, innovation and wages. What has been less studied, by comparison, is how city economies evolve over time. To be sure, there are some significant works on this theme (e.g., BINELLI, 2013; COWELL, 2014; GLAESER, 2005; MICHAELS et al., 2013; EVANS and KARECHA, 2014). However, in general there is a relative paucity of detailed work on the long-run growth, development and adaptation of individual city economies. In this context, The Rise and Fall of Urban Economies: Lessons from San Francisco and Los Angeles is a significant contribution to the subject, since it provides a richly informed causal narrative on these two cities which is not only valuable in its own right but also has a wider relevance and importance, since it provokes questions about theory and method in urban and regional research more generally. The aim of the book is to investigate the development paths of two great Californian city-regions, Los Angeles and San Francisco, over the past 45 years. Why these two cities? As the authors show, while in 1970 average per capita personal income in Los Angeles was 92% of that in San Francisco, by 2012 it amounted to only 71%. Thus from starting at almost identical initial positions, the two cities have since progressively drifted apart, with incomes in San Francisco consistently growing more rapidly than those in Los Angeles. It is this divergence that is the focus of the book. This phenomenon of divergent growth is highly pertinent since it relates to a feature that can in fact be observed across US cities more generally (MORETTI, 2010), and indeed elsewhere. Fig. 1 plots per capita incomes for a selection of 10 large US cities over the period 1969–2013. The increasing divergence in per capita prosperity between the cities is striking, especially from the mid-1990s onwards, when the process clearly began to accelerate. But such divergent income growth (the authors’ indicator for ‘development’) is not confined to the United States. Highly differentiated, and often divergent, patterns of city growth are to be found in other countries (e.g., DIJKSTRA et al., 2013; MARTIN et al., 2016). The research question addressed by Storper et al. in relation to Los Angeles and San Francisco thus has a much wider potential relevance. The challenge, of course, is to explain this divergent development. The problem is that there is no single, universally agreed, theoretical framework to hand. Rather, there is a multiplicity of different possible perspectives. The authors’ approach (in chapter 2) is to set out the main explanatory ideas and propositions from four such perspectives: international development theory (IDT), regional science and urban economics, (RSUE), the ‘new economic geography’ (NEG), and institutions–economic sociology (IES). These bodies of theory are put to work to see ‘how well they do as frameworks for explaining [the Regional Studies, 2016