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Do Local Government Policies Influence Employment Center Growth? Evidence from the Los Angeles Region

Ajay Agarwal
Employment centers are familiar features of major metropolitan areas—instead of a single “downtown,” there are several, sometimes numerous, concentrations of substantial economic activity and, hence, employment (Giuliano et al 2007, McMillan and MacDonald 1997, Redfearn 2007). For local policymakers, it is useful to understand the forces that lead to growth in employment centers, and much theoretical work has been devoted to the subject. In the standard theory, growth of employment centers is explained on the basis of scale economies in production, also known as “agglomeration economies” (see, for example, Mills 1967 and Fujita 1989). Specifically, firms accrue a variety of benefits, both pecuniary and technological, by locating close to other firms, such as access to a large skilled labor pool, knowledge spillovers, and input sharing. In addition, employment center growth is facilitated by good access to transport facilities, including expressway networks (regional access) and airports (national and international access). At the same time, some of the benefits of agglomeration are offset by its disadvantages, such as congestion. These determinants of employment center growth proposed by theory, however, are not sufficient to explain the growth of employment centers at particular locations within a metropolitan region; for example, employment centers do not grow at all locations with good labor force and transport network access.