Theories of Local Economic Growth (Part 1): Concepts, Models, and Measurement

Abstract

Contemporary approaches to understanding the mechanisms determining local economic growth tend to be characterized by a dualism between ‘hard’ quantitative and mathematical models derived from economics and the ‘soft’ qualitative models of geographical theory. In this study, we contribute to a ‘third way’ of knowing that is based upon a theoretically informed econometric analysis of the ‘soft’ processes that are hypothesized to drive local economic growth. In this first of two papers, (part 1 of the study) we focus on questions of methodology and measurement. Specifically, six sets of theoretical propositions on the nature of the mechanisms that promote local economic performance are reviewed: the growth-pole, growth-centres model; the product-cycle model; the flexible-production model; the learning-regions model; the competitive-advantage model; and the enterprise-segmentation model. From this review, eight measurable dimensions are developed that cover the main propositions of these models. These dimensions are calibrated using data for Australia, divided into ninety-four regions, for the period 1984–92. We conclude by exploring the limitations of our mapping between theoretical concepts, measurable dimensions, and surrogate variables, and examine the implications of this mapping for testing the validity of ‘soft’ geographical theories. In a subsequent paper (part 2 of the study) we test the validity of these models of local growth in the Australian context.