On the Growth of Cities: Human Capital and Portfolio Rebalancing | Chapter 11 | Insights into Economics and Management Vol. 10

 The goal of this study is to present a conceptual framework that connects a city's industry mix to population growth and human capital stock. When an industry matures or shows signs of decline, the author contends that a better-managed city can quickly identify other potential industries to sustain its growth. The city is more likely to upgrade its workforce and improve the quality of its human capital. Better quality human capital, in turn, aids in the advancement of industry planning and the maintenance of the city's economic position. The framework's hypotheses are supported by evidence from a sample of eight manufacturing-belt cities and a case study on the city of Detroit. When a city erupts Better-quality human capital, in turn, improves a city's industry mix and strengthens its economic position. While the city of Detroit's financial insolvency has been studied by researchers from various fields, and several factors are thought to be attributable to the event, the author believes that the root of all problems is the city's lack of a diversification strategy. While the auto industry did provide Detroit with a period of prosperity, the city's over-reliance on one industry inevitably led to financial difficulties as the industry matured and increased competition. The Portfolio theory accurately predicts this unfavorable outcome of a non-diversifying strategy. As a result, the author believes that with an appropriate diversification strategy, the city of Detroit could avoid financial insolvency. This study suggests at least two future research directions. First, while it is widely acknowledged that a city's growth and decline are inextricably linked to the life cycle of its industries, there is very little scholarly effort to systematically analyze this issue in the context of the Portfolio Theory. The current effort could stimulate research attention toward this direction. Second, a systematic analysis on the factors that contribute to a city’s economic development is much needed.

Author (s) Details

Yu Peng Lin
Department of Economics, University of Detroit Mercy, USA.

View Book :- https://stm.bookpi.org/IEAM-V10/article/view/1473