The Effects of Social Capital on Local Government Performance and Economic Development by Tammy Wakefield Laughlin A dissertation submitted to the Graduate Faculty of Auburn University in partial fulfillment of the requirements for the Degree of Doctor of Philosophy Auburn, Alabama May 7, 2012 Keywords: social capital, government performance, economic development efforts, economic wealth, municipal government, community involvement Copyright 2012 by Tammy Wakefield Laughlin Approved by Cynthia J. Bowling, Associate Professor of Political Science and Public Administration Linda Dennard, Professor of Political Science and Public Administration Murray Jardine, Professor of Political Science and Public Administration ii Abstract The purpose of this study is to examine the idea that social interaction, government performance, and development efforts positively affect economic wealth on the local level in cities within the United States. New methods to study social capital on the city government level were developed by utilizing zip codes and NAICS industrial codes available through the U.S. Census Bureau. Institutionalism theory was linked to economic development efforts and overall wealth within cities. The use of industrial codes in the study of social capital and particularly associational density, as well as the study of the number and types of organizations involved in the economic development decision making process provides new tools for researchers to understand the role community organizations play in government performance, development efforts, and economic wealth. Some studies argue that community involvement and government performance positively affect the ability of municipalities to promote wealth. (Putnam, 1993; Guiso, Sapienza, Zingales, 2004). Other studies indicate community involvement and government performance do not necessarily promote economic wealth. This study investigates the degree to which social capital, government performance, and development efforts contribute to economic wealth on the city level. This dissertation established a new method to examine social capital on the city level within the United States using publicly available data. The study found community organizations have the greatest impact on economic wealth when included in the decision making process, and is positively related to government performance, and development efforts within the city. iii Acknowledgments The author would like to thank Dr. Cynthia Bowling for her insight and knowledge, and for her constant encouragement throughout this process. The author would also like to thank her committee members Dr. Linda Dennard, and Dr. Murray Jardine for their insight and knowledge. The author would like to also thank the insight provided by former chair Dr. Carl Grafton and former committee members Dr. Anne Permaloff, Dr. Kathleen Hale and Dr. Harold Turk. The author would like to thank the many people that have walked through life with her to provide the encouragement and guidance needed to accomplish this task. She is very thankful for the teachers and mentors that she has had throughout the years. These include Phillips High School teachers: Mrs. Helen Mann, Mrs. Pamela Dixon, Mrs. Charlotte Rushing, Mr. Wayne Phillips, Mr. James McKenzie, Mr. Edward Cummings, and Mrs. June Glass. She is thankful to the mentors who became wonderful friends at Troy University including Mr. James Deloach, Mr. Walt Hollon, Dr. John Tarver, Dr. Charles Durham, and Dr. Don McDonald. She is especially thankful for the encouragement that she received from Dr. Patrick Demerath whom she worked with for ten years who believed in her more than she believed in herself, and always encouraged her to just finish it. The author is thankful for the friendship and encouragement of Mrs. Mary Moseley, Dr. Laura Corn, Mrs. Page Craig and Mrs. Janette Cole. She is thankful for the love and friendship of her husband?s family and for her dear cousins. She is thankful for having Mrs. Movelene Wakefield in her life who taught her that all things good and bad happen in God?s time for God?s purposes. She is particularly thankful that Movelene came into her life and the life of her family. iv The author is particularly thankful for the abundance of love, friendship and encouragement that she has received from her wonderful sisters Sharon Tompkins, and Lisa Thompson, as well as their husbands Tommy Tompkins and Kevin Thompson. She is particularly thankful that they have brought the sunshine of their children into our lives. She is very thankful for having Miss Chelsea Tompkins, Mr. Michael Thompson, and Mr. Matthew Thompson in her life as they have inspired her to think about the future and to encourage them to overcome any obstacles to reach their dreams. She is particularly thankful to have had the love of her parents Jimmy and Joyce Wakefield who brought her up in a home full of love and happiness, in an environment that asked that she strive for success while seeking God?s wisdom, to be thrifty, to do what was right and not what was popular, and to always take the road less traveled. She is also thankful to have had her loving grandmother Mrs. Vonnie Wakefield in her life who was always provided unwavering love to her family, and was the hardest working woman she has ever known. The author is most thankful for the abundant support, and encouragement of her loving husband Benny Laughlin. His great love and companionship have helped her to overcome many obstacles in life. He has shared many heartaches and triumphs. He has kept the ship sailing, and has kept the household afloat both financially and domestically. He has done countless loads of laundry and dirty dishes, while keeping his ego in check. He is a wonderful husband, and she is forever grateful to him, appreciates his sacrifices, and is thrilled to have the love of her life by her side. v Dedication This dissertation is dedicated to the loving memory of my Mom. Joyce Harper Wakefield (1935-1991) vi Table of Contents Abstract .......................................................................................................................... ii Acknowledgements ....................................................................................................... iii Dedication ....................................................................................................................... v List of Tables.................................................................................................................. xi List of Figures ...............................................................................................................xii Chapter 1 Introduction ..................................................................................................... 1 Introduction ..................................................................................................................... 1 Purpose of the Study ........................................................................................................ 7 Overview ......................................................................................................................... 8 Background of the Problem ........................................................................................... 10 Economic Development ............................................................................................ 10 Social Capital ........................................................................................................... 11 Associational Density .......................................................................................... 11 Civic Engagement ................................................................................................ 12 Community Involvement...................................................................................... 12 Government Performance ......................................................................................... 12 Economic Development Effort .................................................................................. 13 Background of the Problem Summary ....................................................................... 14 Research Questions and Hypothesis ............................................................................... 14 Methodology ................................................................................................................. 18 vii Rationale for Using Multiple Regression and Path Analysis ........................................... 18 Organization of the Study .............................................................................................. 19 Chapter 2 Literature Review .......................................................................................... 22 Introduction ................................................................................................................... 22 Historical Perspective of Social Capital ......................................................................... 23 Context Within Political Science ................................................................................... 29 Components of Social Capital ........................................................................................ 30 Networks .................................................................................................................. 32 Norms ....................................................................................................................... 32 Sanctions .................................................................................................................. 32 Trust ......................................................................................................................... 33 Levels of Social Capital ................................................................................................. 34 National Customs Affect Social Capital .................................................................... 35 Individuals Affect Social Capital .............................................................................. 37 Communities Affect Social Capital ........................................................................... 37 Functions and Character of Social Capital...................................................................... 38 Bonding and Bridging Social Capital ............................................................................. 38 Linking Social Capital .............................................................................................. 39 Association Density, Civic Engagement, and Community Involvement ......................... 42 Associational Density ............................................................................................... 42 Civic Engagement ..................................................................................................... 43 Community Involvement .......................................................................................... 48 Social Capital and Government Performance ................................................................. 50 viii Social Capital and Economic Wealth ............................................................................. 51 Government Performance and Economic Development Efforts ...................................... 51 Government Performance and Economic Wealth ........................................................... 53 Summary ....................................................................................................................... 54 Chapter 3 Research Design ........................................................................................... 56 Introduction .............................................................................................................. 56 Research Questions and Hypothesis ............................................................................... 60 Research Model ............................................................................................................. 63 Description of Population .............................................................................................. 64 Data Collection .............................................................................................................. 65 Data Sources.................................................................................................................. 67 Dependent Variable ....................................................................................................... 66 Independent and Intervening Variables .......................................................................... 68 Social Capital Variables................................................................................................. 68 Intervening Variables..................................................................................................... 69 Control Variables .......................................................................................................... 73 Statistical Analysis ........................................................................................................ 75 Cross Sectional Analysis ............................................................................................... 75 Regression Analysis ...................................................................................................... 76 Multiple Regression ....................................................................................................... 77 Multi-Collinearity .......................................................................................................... 78 Endogeneity .................................................................................................................. 78 Conclusion .................................................................................................................... 79 ix Chapter 4 Research Results............................................................................................ 81 Introduction ................................................................................................................... 81 Descriptive Statistics ..................................................................................................... 81 Community Variables .................................................................................................... 81 Intervening Variables..................................................................................................... 87 Correlation .................................................................................................................... 92 Community Variables .................................................................................................... 92 Intervening Variables..................................................................................................... 94 Comparing Independent Variables ................................................................................. 95 Economic Development Effort....................................................................................... 96 Economic Wealth ........................................................................................................ 105 Path Analysis ............................................................................................................... 114 Conclusion .................................................................................................................. 120 Chapter 5 Conclusion .................................................................................................. 122 Introduction ................................................................................................................. 122 Research Questions ..................................................................................................... 122 Drawbacks and Difficulties with Research ................................................................... 129 Comparisons to Prior Research .................................................................................... 130 Implications ................................................................................................................. 132 Practical Advice .......................................................................................................... 134 Future Research ........................................................................................................... 135 Bibliography ................................................................................................................ 137 Appendices?????????????????????????????... 154 x Appendix A?????????????????????????????.. 155 Appendix B?????????????????????????????.. 161 Appendix C ................................................................................................................. 165 Appendix D ................................................................................................................. 166 Appendix E ................................................................................................................. 167 Appendix F .................................................................................................................. 168 Appendix G ................................................................................................................. 169 Appendix H ................................................................................................................. 170 Appendix I................................................................................................................... 171 xi List of Tables Table 3.1 ? Measures for Dependent Variables .............................................................. 68 Table 3.2 ? Measures for Independent Variables ............................................................ 70 Table 3.3 ? Measures for Intervening Variables ............................................................. 72 Table 3.4 ? Measures for Control Variables ................................................................... 75 Table 4.1 ? Frequency of Main Street Membership ........................................................ 82 Table 4.2 ? Frequency of IDA Membership ................................................................... 82 Table 4.3 ? Frequency of Number of Types of Organizations Involved in Economic Development Decisions ............................................................................... 83 Table 4.4 ? Frequency of Cities Awarded GFOA Budget Awards (2001-2004) .............. 88 Table 4.5 ? Correlations between Community (Social Capital) Variables....................... 90 Table 4.6 ? Intervening Measures Correlations .............................................................. 91 Table 4.7 ? Regression Results: Government Performance as Dependent Variable ........ 95 Table 4.8 ? Regression Results: Economic Development Efforts as Dependent Variable ..................................................................................... 99 Table 4.9 ? Regression Results: Per capita Income and Median Household Income as Dependent Variables ................................................................................. 104 Table 4.10 ? Best Models for Median Household Income as Dependent Variable ........ 104 Table 4.11 ? Best Models for per capita Income serving as Dependent Variable .......... 105 Table 4.12 ? Path Coefficients and Significance .......................................................... 109 Table 4.13 ? Total Effect of All Independent and Intervening Measures on Median Household Income ................................................................................... 112 Table 4.14 ? Total Effect of All Independent and Intervening Measures on Median Household Income ................................................................................... 119 xii Table 5.1 ? Support of Questions and Hypotheses ....................................................... 128 xiii List of Figures Figure 1.1 ? Multiple Regression Model.................................................................................... 20 Figure 3.1 ? Variables: Independent, Intervening, and Dependent .............................................. 66 Figure 4.1 ? Histogram of the Number of Putnam Style Groups per 10,000 People .................... 84 Figure 4.2 ? Histogram of the Number of Olson Style Groups per 10,000 People ...................... 85 Figure 4.3 ?Histogram of the Percentage of Registered Voters who Vote in the 2004 General Election for President???????????????????? 86 Figure 4.4 ?Frequency of the Number of Performance Standards Utilized in Economic Development within Cities?????????????????????. 86 Figure 4.5?Histogram of the Number of Types of Strategic Plans used in Economic Development???????????????????????????. 87 Figure 4.6 -Histogram of the Number of Types of Programs used in Economic Development .......................................................................................................... 89 Figure 4.7 ? Model Illustrating Paths of Independent and Intervening Variables?????.. 96 Figure 4.8 ? Complete Model????????????????????????? 101 Figure 4.9 ? Complete Model?????????????????????????. 107 Figure 4.10 ? Path Diagram with Beta Coefficients???????????????? 110 Figure 4.11 ? Path Diagram with Beta Coefficients ................................................................. 118 Figure 5.1 ? Final Path Analysis ............................................................................................ 128 1 CHAPTER 1 Introduction Technological advances and increased capital mobility have resulted in the loss of jobs in the United States to less developed nations (Friedman, 1999, 2004). Regional economists and development researchers working on the state and local level continue to seek creative solutions to reverse job losses and create wealth. Scholars (Putnam, 2000; Fukuyama, 1995; Halpern, 2005) have advanced theoretical ideas to suggest wealth creation is more likely to take place in communities with an involved citizenry and / or a high functioning government. These theories can be explored as all cities vary in their strengths and abilities. Some cities are home to healthy vibrant economies, while others suffer from stagnation. Some cities do an excellent job in educating its citizens, while others do not. Some cities have a highly productive and educated work force, while other cities lag behind. Some local problems are universal; others are specific to particular places. Towns and cities everywhere struggle with improving crumbling buildings and serving needy populations. All cities want to provide job opportunities for their workforce. Some cities, like Tupelo Mississippi, are able to overcome struggles, and stumbling blocks to become idyllic places to live, work, and raise families. How do towns and cities overcome their difficulties? What allows a place like Tupelo to overcome its struggles? Do well performing cities exist solely because they have access to physical resources or is it something far more elusive? 2 Many practitioners believe positive economic development results from leadership and funding only. This idea arose in a time when the Federal government spent countless dollars re-inventing inner-cities by the acre. Cohen (2007) provides a detailed case study of the role leadership and funding played in development between the 1940s and 1970s by focusing on the work of Edward J. Logue. Logue led New Haven CT, Boston MA, and then the State of New York in its development efforts in the 1950s and 1960s. Logue was considered one of the top development leaders in his time. He had great talent for obtaining funds from the Federal government to transform downtown areas. Although the efforts of Logue and others led to mixed results, the ideas of yesterday persist. Newspaper accounts such as Tesslar?s 2011 account of federal tax credits in Dayton, Ohio continue to discuss how the reliance of cash stimulus still permeates the economic development landscape. Not all effective development strategies rely heavily on a cash component. Some cities tend to re-use existing buildings and rely on the volunteer efforts of the people living within the city. This strategy is often chosen from necessity. On occasion, cities find themselves in crises due to plant closures or natural disasters. Citizens unite to build something from nothing. Unity of purpose leads to pride in completed projects, and ultimately makes citizens proud to hail from a specific place. Not all development is successful as development projects can be poorly received or met with suspicion by the citizenry. This leads to the question: Why are some cities and towns able to develop economically with meager funding while other cities cannot? Dr. Vaughn Grisham of the University of Mississippi tells a fascinating story about how the people of Tupelo Mississippi pulled themselves out of poverty by working 3 together. He tells how citizens in the 1930s changed the city because of one man, George Mclean. Mclean, a Tupelo newspaper editor, said "It is the responsibility of the people of Mississippi to try to raise the level - economically, educationally, spiritually and otherwise - of all the people of Mississippi. There's nobody else who's going to come in here and do it for us"(www.createfoundation.com). Mclean told the local merchants their prosperity rested on the fate of the local farmers and convinced the merchants to buy a prize bull to help the farmers add dairies to their operations. Afterwards, success built on success. Tupelo flourished for decades and still serves as a beacon of what a city can do if the people of the city choose to work together to accomplish their goals (Grisham, 1999). The Tupelo story is included in Putnam?s book Better Together which provides numerous case studies to inspire the reader to want to be like George Mclean. The case studies found provide evidence to show people can work together to make a difference in their community even with very few resources. The attitude and willingness of the people to work together is possibly one of the most important components of both government performance and economic development. Some of the disparities in prosperity between cities and towns are regional in nature. Other differences can be explained by access to interstate highways or whether an area is rural or urban. Yet, other differences among cities defy explanation. Why would two cities close in size, proximity, and natural resources have dissimilar economic growth and development? Snyder (2002) argues community groups play an important role in forming networks of solidarity among people who would otherwise be isolated. While recreational groups may only help build a sense of connectedness among members, 4 groups like the PTA move beyond connectedness to address public problems like childhood education. Imagine two cities. One city has an active PTA in which the parents and students work with the teachers and administrators to assure a positive learning environment for students. Business owners actively work with the local chamber of commerce to support their efforts to grow existing businesses and recruit new businesses. For the most part, the citizens actively participate in both the community and the local government. Not surprisingly, over the years the city manages to attract highways, businesses, and over many years doubles in size. Now imagine another city, where the people do not work together. The handful of people who do attend PTA or chamber of commerce meetings are accused of seeking undue favor for their children or for their businesses. Volunteering within the city all but guarantees quarrels and bickering. At the same time, the citizenry does not participate in city government. There is a general apathy about the overall condition. Any new efforts made by city government are met with suspicion. The two cities were once very similar. Over the years, the first city has eclipsed the second one. The citizens in the second city wonder why the first city gets all of the jobs, the new school buildings, new civic center, and interstate highway. They wonder why the other city seems to have all of the luck. The citizens of the second city have no perception of how active participation could change economic outcomes. The citizens do not perceive how working for the community could be of benefit, or how voicing opinions could lead to a seat at the decision making table. Competition for resources is greater than it ever has been. How will communities who do not work well together survive? Cox (2004) described many of the challenges 5 local economies will likely see in this age of globalism. He predicts labor, corporations, and government will create new models to cope with the need to shift cost away from themselves and onto others to be the ?low cost provider.? Wal-Mart is widely criticized by organizations such as the AFL-CIO (www.aflcio.org/corporatewatch/walmart/) and Wal-Mart Watch (http://walmartwatch.org/get-the-facts/) for shifting healthcare cost away from the company and onto the public by mostly hiring part-time workers without healthcare benefits. Government and hospitals must then shoulder the burden of caring for the Wal-Mart workers. This leads to higher medical care and insurance cost for the insured and higher taxes for the public. In more recent times, workers have seen the wholesale transfer of jobs from the United States to nations such as India and China. This has meant higher unemployment for the United States, and in turn has lowered the taxes paid by Americans resulting in budget shortfalls on the federal, state, and local levels. Cox (2004) suggests governments will soon be forced to rethink how and what services will be provided to the citizens. Governments will make policy choices with social ramifications. Cox states ?It is not just the redistribution of values that is likely to be at stake. In addition, there are ingrained practices, deeply held convictions, structures of cooperation to be overturned.? Cox goes on to explain that what happens on the local level will be decided through the structure of government and which powers can exert the most political power. An NPR broadcast in 2007 by Davidson explains how globalization affects local economies. The story illustrated how globalization affects local economies by describing the ill fated American sock industry, and its home of Fort Payne, Alabama. Just a few years ago, Fort Payne was known as the sock capital of the world and was the home to 6 over 150 sock factories. In the late 1990s the U.S. started importing large numbers of socks from China, Pakistan, and Honduras because socks were one cent cheaper to produce outside the United States. Fort Payne?s sock industry lost two-thirds of its manufacturers in a shakeout which was quick and brutal. Fort Payne quickly went from a successful city to one with thousands of laid off high school dropouts whose only skills were related to making socks. Fort Payne adapted quickly and was able to bring in several new businesses. The city of Fort Payne has also learned the importance of education and now invests in it and in the future of the people. For now, many former sock workers have had to settle for lower paying retail jobs, but they have high hopes for the future. As global competition becomes stronger, small towns face many new challenges such as being able to provide needed services to the public while still offering good jobs. If they are to remain strong, they must draw on all their resources to position themselves not only in their local environment but in the world. The case studies described in Putnam?s Better Together, particularly Grisham?s Tupelo, provide one possible avenue to assure growth for our cities and nation in the 21st century. This dissertation explores the following question: ?Does social participation influence economic wealth on the city level?? City government performance and development will be examined to determine if and how participation by the citizenry increased the performance of city government, affected the economic development efforts by cities, and influenced the economic wealth within cities. This question will be investigated with the use of a review of the pertinent literature and by use of a multiple 7 regression analysis on social, governmental, and economic data available from 641 cities within the United States. Purpose of the Study This study developed a model to provide evidence to determine whether social interaction, government performance, and development efforts positively affect economic wealth on the local level in cities within the United States. Previous studies have linked parts of the model used in this study together, but have not combined all of the parts at the same time. This study steps beyond the existing literature by developing methods to study social capital on the city government level by utilizing zip codes and NAICS industrial codes available through the U.S. Census Bureau. This study is distinctive in its exploration of the number of types of organizations involved in economic development. This essentially linked institutionalism theory to economic development efforts and overall wealth within cities. The use of industrial codes in the study of social capital (and particularly associational density) as well as the study of the number and types of organizations involved in the economic development decision making process provides new tools for researchers to understand the role community organizations play in government performance, development efforts, and economic wealth. Very few studies have been conducted regarding the interaction of social capital, government performance, development efforts and wealth (Boix & Posner, 1998; Ball 2001; Dasgupta, 1999). Some studies argue community involvement and government performance positively affect the ability of municipalities to promote wealth (Putnam, 1993; Guiso, Sapienza, Zingales, 2004). Other studies indicate social capital and accountable government do not necessarily promote economic wealth, or play little or no 8 role in cities. Existing studies are fragmented and inconclusive as they tend to only study either social capital or government performance effects on economic wealth. This study investigates the degree to which social capital, government performance, and development efforts contribute to economic wealth on the city level. For the purpose of this study, the following terms have been defined: Social capital is the public and private assets created when people come together socially. Social capital can be referred to as the level of cohesiveness and participation in collective activities. Three forms of social capital will be discussed. These are associational density, civic engagement, and community involvement. Associational density refers to the quantity of associations in each city. Civic engagement refers to people and organizations working to make improvements in a community through political processes. An example of civic engagement is voter registration. Community involvement shows individuals and organizations involved in local economic development. Overview New technologies have changed the needs of companies wishing to locate new facilities, while allowing knowledge based workers to live wherever they choose. As the United States economy transitions from industrial to knowledge based, the abilities of the workforce become more important than transportation cost and logistics. Municipalities offering opportunities with the lowest tax burdens will be able to successfully compete for new people and jobs. As a result, fierce competition develops among local governments as they strive to provide high functioning schools, safe and clean neighborhoods, and enjoyable 9 recreational activities with a low tax burden. Competitive cities leverage the abilities of non-profit organizations and volunteers to provide services rather than being the service provider. Thus, the local government best serves the public if they are successful in acting as an agent between non-profits and state and federal programs. (Clarke and Gaile, 1997) Questions often arise as to why some city governments with similar resources have a greater ability than others to provide positive economic development for their citizens? Do the attitudes of the citizens towards working together affect a city?s ability to provide greater economic development, and does their attitude toward cooperation affect the overall performance of the city?s government? Finally does the government?s performance actually affect economic wealth? Belief in the willingness of a community to provide opportunities for all and trust in the effectiveness of the political system seems to be essential to economic success in Western democratic governments. By better understanding social and governmental factors, we can determine how the social environment and government actions impact economic wealth in communities throughout the United States. In this light we ask: Can the promotion of civic engagement, trust among neighbors, and good government become an economically viable tool to promote wealth? Do strong interpersonal relationships improve performance and increase participation? Will local governments with a participating public operate more efficiently? Will the requirements for increased face to face contact ultimately be inefficient? Grisham (1999) explains the use of social capital is not initially efficient due to the need for face to face contact. However, long- 10 term results are very efficient and worthwhile for the overall economic wealth of the local area. Background of the Problem Economic Wealth Local economic development is a process involving both the creation of jobs for the public, and providing a high quality of life for the citizenry. Successful cities understand it is much easier to attract new industry into the city if they can offer personnel a pleasant environment for their families. Components of this environment include high quality schools, parks and recreational facilities, low crime rates and cultural activities (Blair, 1995). Beginning in the 1970s, conservative attitudes towards taxing and spending led local governments to find more creative ways to provide services to citizens as revenues slowed or declined. Public officials became more entrepreneurial in their efforts to rebuild the local economic base. At times, some agencies have chosen a top-down approach to provide private service delivery, with little or no input from citizens. In other instances, a bottom-up approach was used with nonprofit and volunteer organizations (Eisinger: 1988; Reese and Fasenfest 1996; Walzer and Jacobs 1998) providing a broader based approach and tapping into civic institutions (Walzer and Jacobs; Jones 1998). Jones (1998) labels this bottom up approach as the ?social economy? partnership model. This model contrasts with free-market and private sector partnerships as wealth creators. Wilson (1995) believes creating economic development through volunteer organizations is ideal as volunteer organizations are independent from the state, have a 11 concern for human development, offer democratic structure, and practice nonprofit distribution. Time spent by volunteers to improve the community or provide economic development certainly provides a low cost alternative for local governments, while providing a higher quality of life for the citizens. Much can be learned about a specific community?s ability to provide positive economic development and wealth by studying how well the community works together by studying the social capital concept. Social Capital Over the past fifteen years, social scientists have used the concept of social capital to focus efforts on understanding how and why people assemble in groups and how assembly affects society. Maskell (2000) suggests frequent assembly influences mutual trust and economic performance within the community, and more trusting communities are better able to care for its residents. Thus, the economic building blocks of health, education, and welfare are improved. The increased mutual trust of residents extends to elected officials which enables civic discourse, and allows for flexibility in policy making. This study examines three aspects of social capital. Associational Density Associational density provides a measure of how much people assemble together within an area. This study specifically examines the number of Putnam style and Olson style groups within a city according to its population. Putnam groups are associations and civic organizations giving participants a sense of shared endeavors. Olson groups are associations meeting for the purpose of lobbying government for special benefits. 12 Civic Engagement Civic engagement, another element of social capital, increases government accountability and allows for greater monitoring of elected officials. Civic engagement is unlike associational density as the interaction is strictly political in nature, and lacks a social purpose. It promotes activities like voting which can make the government more responsive to the needs of the citizens at large as opposed to special interests. The preceding activities help eliminate waste, fraud, inefficiency, and incompetence because a more involved citizenry would serve as a deterrence to wrong doing by public officials. Further, a more involved citizenry would be more likely to catch any wrong doing by public officials. Greater trust of public officials to do the right thing gives the public officials more freedom to do what they believe is correct. Community Involvement Community involvement benefits from high levels of associational density and civic engagement. When projects are completed by the community, less government intervention is required. This has the potential to make the city more attractive, lower taxes, and attract new residents and businesses. King (2004) theorizes citizens move to jurisdictions offering services they value for tax rates they are willing and able to pay. (See also: Lyons & Lowery 1986; Ostrom, 1977; as well as McGinnis & Schneider, 1989). Community involvement also improves government performance because the community will have increased interaction with government officials which in turn increases government accountability. 13 Government Performance Anecdotal evidence of a connection between government performance and economic wealth are plentiful. One need only to think of stereotypical cases of local governments in third world countries. Government entities are riddled with nepotism, government employees are unavailable, and offices are often closed. Putnam (1993) indicates even in a modern country like Italy, significant differences in the level of economic development relate to the government performance of each region. In China, Wei (2000) found capital inflows were impeded due to high levels of government corruption. This was corroborated by Golberman & Shapiro (2003) who suggested foreign direct investment by the U.S. companies was stymied by increased red tape and lack of transparency. Economic Development Efforts Scholars discuss variations in the development tools used by cities. Structural theory posits development is shaped by economic and social conditions beyond the control of local policy makers. Peterson (1981, 20) argues cities promote their own interests, and respond to pressure by competing with other cities to attract new firms and residents. Rubin and Rubin (1987) use structural model theory to suggest slow growth or decline make cities more vulnerable to pressure to promote growth. This compliments Baldassare (1986) who believes rapidly growing places (primarily suburbs) feel little need to stimulate development and may try to limit growth. The agency model places emphasis on leadership, coalition building, organization, and political influence. Logan and Molotch (1987) link development to ?growth machines? 14 comprised of politicians, local media, retailers, and others with similar interests who hope to benefit from the improved economy. Development policies are more likely to be adopted in cities with a mayor-council government (Feiock and Clingermayer, 1986). Cities with greater bureaucratic capacity (staff size, expertise, and experience) should be able to implement more development policies (Rich 1989). Moreover, cities may employ more economic development tactics when they have a specialized agency to administer them (Fleischmann and Green 1991; Rubin 1989). Case studies stress the importance of strategic planning for successful development programs (e.g., Blakely 1989: 72-90). The relationship between use of a plan and the number of development policies a city adopts is ambiguous, however (Fleishmann et. al., 1992). Background of the Problem Summary The previous sections detailed how municipalities are limited in their abilities to provide services and improve the economic viability of their cities. An overview of social capital, its subgroups of associational density, civic engagement, and community involvement were discussed. Government performance and economic development efforts were also reviewed. Each section focused on how the citizenry may influence economic wealth within a city either directly or indirectly. Research Question and Hypotheses This dissertation poses the questions: Does social participation influence economic wealth on the city level? And if so, does social participation affect wealth 15 directly, or by improving the performance of the city government and/or economic development efforts within the city. Specifically, this dissertation asks: Q1: Does social capital affect municipal government performance? H1: In comparing American cities, social capital within the city positively affects local government performance. There are two basic ways social capital can improve governmental performance. First, it can increase governmental accountability. Social capital enhances the political involvement of citizens, making it easier to overcome the collective action problem of paying attention to and keeping track of the government. It inspires activities like monitoring officials, protesting, and voicing preferences, which can make the government more responsive to the needs of the citizenry at large as opposed to special interests. The preceding activities help eliminate waste, fraud, inefficiency, and incompetence through detection or deterrence. When there is a fund of social capital, ?free riding? is less frequent and government performance can be improved by affecting the level and character of political participation, reducing ?rent-seeking,? and enhancing ?public-interested behavior? (Knack, 2002). Second, social capital can make government more efficient. It encourages cooperation and public spiritedness among officials and administrators; and counter-act gridlock and polarization. Other evidence suggests social capital leads to ?greater innovation and flexibility in policy making,? thus allowing for the creation of policy to speed response to economic crises or take advantage of opportunities. 16 Q2: Does social capital affect economic development efforts and wealth? H1: In comparing American cities, social capital positively affects economic development efforts within the city. H2: In comparing American cities, social capital positively affects economic wealth within the city. H3: In comparing American cities, economic development efforts positively affect economic wealth. Social capital enables firms to improve their innovative capability, facilitates business transactions, cuts coordination costs, and enhances the division of labor. Maskell (2000) states general reciprocity (a form of social capital) influences the level of mutual trust within a community and effects long-term economic performance as the positive or negative levels of trust builds upon itself. Communities with greater social capital should have greater trust, and a greater level of care for the fellow man. Because of this, economic building blocks such as health, education, and welfare are also improved. Putnam (1993) relates higher levels of social capital to people being more involved in all types of community organizations. Greater involvement in the community at large often includes community self-improvement projects leading to economic development (McGuire et. al., 1994). At first glance, one would think increased development efforts would automatically translate into economic wealth. This may or may not be the case as some localities are blessed with positive economic wealth with little or no effort. This is often the case with suburban growth. At the other extreme, rural and inner cities may be forced through circumstances to spend countless hours on 17 economic development efforts, hoping that hard work and determination could provide just a few new jobs. Q3: Does municipal government performance affect economic development effort and wealth? H1: In comparing American cities, municipal government performance positively affects economic development efforts. H2: In comparing American cities, municipal government performance positively affects economic wealth. H3: In comparing American cities, economic development efforts positively affect economic wealth. It can be argued well performing governments are efficient, competent, and responsive to the citizenry. Putnam (1993) revealed a correlation between government performance and the level of economic development in Italy. Specifically, Putnam found regions with more professional, responsive governments were also more economically advanced, and government performance within the region was at least in part responsible for the differences in economic prosperity. Knack and Keefer (1995) examined the effects of government performance on economic development in 27 countries. They concluded government performance has a significant effect on economic wealth and development. Government performance likely affects economic development efforts within a locality. Economic development efforts are often a high priority for communities. Logic dictates high functioning communities will likely be competent in its economic development efforts. This in effect gives the community an advantage. The community is 18 attractive because it is well-functioning. Then, as part of its strong operations, it also possesses a strong competent economic development effort. In this case, a high functioning government leads to a highly efficient economic development effort, which in turn leads to positive economic wealth and development. Methodology This dissertation analyzes the effects of social capital on a city?s ability to prosper. It will test whether the overall government performance of a city is related to levels of social capital. Further, this dissertation will analyze the effects of social capital on government performance, development efforts, and wealth on the city level. By conducting this analysis, researchers will gain a better understanding of whether and / or how the social and political dynamics within each municipality influences the overall economic wealth within the community, or if the differences can be more easily described by other controlling factors. By conducting multiple regression analysis of the social capital elements we can determine to what degree social capital affects government performance, and development efforts. The analysis will also access to what degree government performance alone affects economic wealth with or without citizen participation. Rationale for Using Multiple Regression and Path Analysis Multiple regression analysis is a widely used tool in conducting social science research. It is appropriate when the researcher wishes to explore the relationship between one dependent and multiple independent variables. The purpose of multiple regressions are to provide (1) an estimate of the independent effects of a change in the value of each independent variable on the value of the dependent variable and (2) an empirical basis for 19 predicting values of the dependent variable from the knowledge of the joint values of the independent variables. (Manheim, et. al. 2002) The Path Analysis is a statistical technique by which we can evaluate the accuracy of models by empirically testing the direct and indirect effects of one variable on another. It has been widely used in the social science because it is applicable to many research questions and allows the researchers to test large pieces of theory at one time instead of testing each hypothesis separately. (Manheim, et. al. 2002) Figure 1.1 Multiple Regression Model Independent Variables Dependent Variable Putnam Style Groups Economic Wealth Olson Styles groups Civic engagement Community Involvement Intervening Variables Government Performance Economic Development Efforts By conducting this study, we can develop a greater understanding of the need to promote social capital and good government in improving economic development on the local level. Organization of the Study This dissertation is divided into five chapters. Chapter 1 provides an overview of why we need to study social capital, government performance, and economic development efforts to enhance local economic wealth. Chapter 1 also discussed how social capital affects government performance and how social capital, government 20 performance, and development efforts affect economic wealth. This chapter also provides an overview of the purpose, methodology, and organization of the study. Chapter 2 discusses the pertinent literature addressing the following questions: (1) Does social capital affect municipal government performance? (2) Does social capital affect economic development efforts and wealth? (3) Does municipal government performance affect economic development efforts and wealth? This review provides a scholarly and comprehensive assessment of the differences of opinion on the value of the contributions of the social capital factors of associational density, civic engagement, and community involvement on government performance, economic development efforts, and economic wealth. This literature review will also provide a discussion of the value government performance plays in economic development efforts and economic wealth. The review of the literature demonstrates prior studies have not definitively answered the questions concerning the relationships between social capital, government performance, and economic development. Chapter 3 provides an overview of the methodology and statistical techniques, sources, procedures, research parameters, and methods used for data collection and analysis criteria. The identification and explanation of indicators used to measure the independent variables of associational density, civic engagement, community involvement, and the intervening variables of government performance, and development efforts are identified as well as indicators to measure economic wealth are presented. Control variables are also presented in this chapter to determine whether there are other plausible explanations for the phenomena presented. 21 Chapter 4 presents a graphical analysis of descriptive statistics. Trends and patterns in the data are noted in relation to associational density, civic engagement, community involvement, government performance, and economic development. The hypotheses are evaluated in light of the data and the supporting literature. Presentations of the statistical findings for each of the hypotheses based upon simple and multiple regressions are made. The nature of the relationship between each of the independent variables and the increase or decrease in economic development is first established through simple regressions of the direct relations between them. More complex multiple regression models are applied to describe how the independent variables act together to shape economic wealth. Control variables are then inserted into multiple regression models to determine whether alternate explanations better explain the models. Chapter 5 provides a discussion of the findings and conclusions to this study. Based upon results presented in Chapter 4, each of the research hypotheses is evaluated and related to the theoretical literature. The limitations of the study are noted, along with recommendations for further study in the areas of social capital, government performance, economic development efforts, and economic wealth. 22 Chapter 2: Literature Review Introduction Over a century and a half ago, Tocqueville ([1840]; 1969) stated the health of a democratic society may be measured by the quality of functions performed by private citizens. Tocqueville was enamored by the regularity in which Americans congregated to solve community problems, and the willingness of all strata of the community to serve together to create prosperity by creating business opportunities and to improve the community. This leads to the question: Does social participation and good governance equal economic wealth on the city level? Blair (1995) argues most decisions affecting local economic development are made by self-interested private individuals or institutions. Blair states economic development is part of a larger process of community development and notes it is difficult to make distinctions between social, political, and economic concerns within the community. Grisham (1999) argues, at its best, community development is about people working together to solve common problems. Blair and Grisham?s opinions concerning the nature of community and economic development differ primarily because Blair looks at economic development as an economist and Grisham looks at the same problems as a sociologist. In 1988, sociologist James S. Coleman helped pioneer the concept of social capital. In his paper, ?Social Capital and the Creation of Human capital,? Coleman examined the very different ideas about social action in the fields of sociology and economics. Most sociologists see the individual as a socialized being whose actions are governed by social norms, rules, and obligations. Thus, actions of individuals are partially explained by social capital (Coleman, 1988). This contrasts with the ideals of 23 most economists who see the individual acting independently in his pure self interest to receive the greatest benefit for his/her actions. In sociology, the individual is solely a product of his or her environment. In economics, the individual is not at all affected by the social environment. By labeling the benefits of interacting with other individuals a form of capital, it allows sociologists, economists, and public administrators to better understand social phenomena and their cost and or benefit to society. Aspects of the social capital concept will be examined to provide insight into how the social environment, particularly citizen participation affects the quality of government, development policy, and economic wealth. City government performance will be examined to determine if and how participation by the citizenry increases the performance of the city government, affects the economic development efforts by the city, and impacts economic wealth. This chapter discusses the role social capital plays in government performance and economic development on the local level. Historical Perspective of Social Capital The role society plays in our everyday lives has been studied from the earliest times. Theoretical precursors to social capital can be traced back to Adam Smith, de Tocqueville, Durkheim, and arguably Aristotle. In public administration, the concepts of institutionalism and communitarianism arose with parallels to the social capital concept. The term ?social capital? was first used in its present context by Hanifan in 1916 to gain support by business people for progressive ideas, and was picked back up in the 1980s by Bourdieau and Coleman who wished to explore the concept and gain support by economic minded administrators. 24 Alexis de Tocqueville is often quoted in support or defense of particular issues in American society. Authors in favor of collective action in America often refer to the work of Alexis de Tocqueville and his praise of associational life in 19th century America. Tocqueville was interested in the ?role associational life plays in society? and what he believed was the foundation of American democracy. Tocqueville stated, ?Nothing, in my view, more deserves attention than the intellectual and moral associations in America. American political and industrial associations easily catch our eyes, but the others tend not to be noticed? (de Tocqueville, [1840] 1969, p. 517). Tocqueville argued ?an association unites the energies of divergent minds and vigorously directs them toward a clearly indicated goal? (ibid, p. 190). In modern times, social scientists would rephrase Tocqueville?s argument and say associations facilitate the solution of collective action problems. Associational life also counterbalances the dangers of individualism, which might eventually degenerate into an ?exaggerated love of self which leads man to think of all things in terms of himself and prefer himself to all.? (ibid) Tocqueville argued through associational life, ?feelings and ideas are renewed, the heart enlarged, and the understanding developed only by the reciprocal action of men upon one another? (ibid, p. 515). Durkheim favored group action as well. Durkheim wrote: ?A nation can be maintained only if, between the state and the individual, there is interposed a whole series of secondary groups near enough to the individuals to attract them strongly in their sphere of action and drag them, in this way, into the general torrent of social life? (Durkheim, [1893] 1964, p 28). Durkheim observed, even for the most individualistic of acts, the behavior of individuals could not be understood in isolation from the characteristics of 25 the community and the relationships in which they are embedded (Durkheim, [1893] 1964, p 28). Adam Smith, known as the father of modern economics weighed in on the social fabric as well. Smith understood the importance of mutual sympathy, networks, and values in the sustaining of markets (Bruni and Sugden, 2000). His examples were not always positive, as he pointed out ways merchant meetings were used to conspire against the public for greater private profit (A. Smith, [1776] 1979). Even with this interest by Smith, economists have generally not shown great interest in the role of social networks and norms in economic life. Although there has been some interest, (I. Fisher, 1906; Couse, 1937, and Loury 1977) most economists have not been interested until relatively recently (Piazza-Giorgi, 2002). The earliest specific use of the term ?social capital? (Woolcock, 1998) seems to have been by Hanifan (1916, p. 130; 1920, p. 16). Hanifan used the term to refer to ?good will, fellowship, sympathy, and social intercourse among the individuals and families who make up a social unit? (1920, p. 78). Hanifan used this definition to facilitate discussions with hard-nosed businessmen who would likely be more impressed with economic language over softer references to community. This is similar to the decision of contemporary social scientists to use this term to explain the importance of society to money-minded policymakers of today. Hanifan (1916) spoke of making tangible assets more valuable. He referred to: ??that in life which tends to make these tangible substances count for more in the daily lives of a people, namely, goodwill, fellowship, mutual sympathy and social intercourse among a group of individuals and families who make up a social unit, the rural community, whose logical center is the school. In community building as in business organization and expansion there must be an accumulation of capital before constructive work can be done.? (Hanifan, p. 130) 26 Origins of Hanifan?s work were embedded in the social center movement within the progressive era. This movement included the promotion of civic clubs, community music, reading circles, public libraries, and university extension (Farr, p. 13, 2004). John Dewey served as the inspiration of many of Hanifan?s ideas. For Dewey, ?society means association; coming together in joint intercourse and action for the better realization of any form of experience which is augmented and confirmed by being shared? (Dewey, p. 12:196, 1920). Dewey further stated democracy itself was nothing other than ?a mode of associated living? experienced by citizens in and through their communication with each other, via associations, education, and public work. (Farr, p. 14, 2004) Modern academic interest in social capital dates back to the 1980s. In Europe, Bourdieau noted economist?s worldview strongly influenced both policy and social sciences. He argued economic orthodoxy limited itself to a narrow band of practices. Bourdieau offered the following definition of social capital: Social capital is the sum of the resources, actual or virtual, that accrue to an individual or a group by virtue of possessing a durable network of more or less institutionalized relationships of mutual acquaintance and recognition. Acknowledging that capital can take a variety of forms is indispensible to explain the structure and dynamics of differentiated societies. (Bourdieau and Wacquant, 1992, p. 119) Close to the same time, James Coleman published a paper inspiring interest for many researchers. Coleman offered a very broad concept of social capital not grounded in a narrow area of study: Social capital is defined by its function. It is not a single entity but a variety of different entities, with two elements in common: they all consist of some aspects of social structures, and they facilitate certain actions of actors ? whether persons or corporate actors ? within that structure. Like other forms of capital, social capital is productive, making possible the achievement of certain ends that in its absence would not be possible. (Coleman, 1988, p. 96) 27 In today?s academic world, one name has become almost synonymous with social capital. Putnam?s definition of social capital is widely quoted: Features of social life ? networks, norms, and trust ? that enable participants to act together more effectively to pursue shared objectives?Social capital, in s hort, refers to social connections and the attendant norms and trust. (Putnam, 1995, pp. 664-5) In Making Democracy Work, Putnam (1993) compared different regions of Italy in an attempt to determine what made some regional governments more effective than others. Putnam found the differences in the effectiveness of the regional governments ? their speed of action, efficiency with which they worked, and the public?s perception of them could not be explained by the size of their budgets or policy frameworks. Putnam (1993) found the critical factor to explain the effectiveness of the regional governments was the level of trust between strangers. Putnam?s argument is essentially, the success of governments can be explained with the stable differences in social capital between the regions. Fukuyama (1995) also brought attention to the concept of social capital. He believes economists have underestimated the importance of social capital. He noted successful nations such as the U.S. and Japan had a high level of trust between strangers, while the underperformance of Russia and African nations could be explained by a lack of trust between their own people. Fukuyama (1995) notes a weakening of social capital within the United States, and argues the weakening authority of civil associations has led to the rise of a strong state. Further, he argues this decline in trust has created greater costs for tax payers, as a loss of trust leads to increased costs for security, police protection, and legal fees. 28 As the works of Putnam and Fukuyama have gained notoriety in the social sciences, a flood of articles and books has sought to provide new insights into the social capital concept. The explosion of articles has helped at times to define social capital, while adding detail to the depth and breadth of the concept. At the same time, the vast number of articles has had the effect of going in many conflicting directions, and making the study of social capital confusing. Social capital as a term has been used sporadically since the early twentieth century, but only came into wider and more consistent usage following the work of Coleman, Bourdieau and Putnam in the late 1980s and early 1990s. The term refers to the social networks, norms and sanctions facilitating co-operative action among individuals and communities. From 1995, there has been an explosion in research on the topic across a wide range of academic disciplines. This expansion shows no signs of slowing, with national and even international policymakers and institutions showing increased interest in the concept and its apparent consequences. Controversy still surrounds the measurement of social capital, but a rough and ready measure with reasonable reliability and validity seems to be ?social-trust?, or more succinctly, the extent to which people in a given community or region feel others can generally be trusted. Work is currently under way in a number of countries on national ?audits? of social capital, and should lead to more detailed information on the different types of social capital and their consequences. However, the development of cross- nationally accepted and comparable measures of all the different dimensions of social capital may be some way off, because of cultural differences and the problem of establishing functional equivalence. 29 Context within Political Science Institutionalism?s discussion of power and communitarianism?s discussion of networks, norms and sanctions are identical to Putnam?s definition of social capital. Before the late 1960s, the study of networks focused on power and the ways in which it is attained or denied through interactions. Prominent scholars in this area include: Mills & Ulmer (1946), Mills (1956), Dahrendorf (1959), and Robert Dahl (1961). In 1946, Mills and Ulmer asked: ?Do communities with larger war plants manifest markedly different levels of social, economic and political welfare than communities where the economic base consists of many, locally owned firms?? Mills & Ulmer found cities with many smaller firms had a better socio-economic well being than cities dominated by a few larger firms. In Who Governs? Dahl (1961) reasons outcomes in public policy are ultimately the outcomes of free competition between ideas and interests in society. Dahl states power involves the control of people?s behavior. Bachrach and Baratz disagree with Dahl by arguing power includes the ability to exclude issues from the agenda. By the 1970s, Dahl concluded liberal democracy provided its greatest benefit to business interest, and had negative effects for individuals. Dahl?s remedy for this situation was to create a more participative, open and fairer democracy. Communitarianism serves as a response to the 1960s and 1970s ?Rawlsian? policy research concerned with fairness of outcomes, and the success of the 1980s focus on the individual. The idea of the ?community? as a response to state centralism and free market individualism is not a new idea. (Parsons, p. 51-52, 2001) Etzioni (1994) is at the forefront of advocating communitarianism as a public policy approach. Etzioni wrote: 30 As communitarians see it, a strong, but scaled back, core of the welfare state therefore should be maintained. Other tasks, currently undertaken by the state, should be turned over to individuals, families and communities. The philosophical underpinnings for this change require the development of a new sense of both personal and mutual responsibility. But how do we work out which activities should be dealt with at which level of society? ?B y applying the principle of subsidiarity. This says that responsibility for any situation belongs first to those who are nearest to the problem. Only if a solution cannot be found by the individual does responsibility devolve to the family. Only if the family cannot cope should the local community become involved. Only if the problem is too big for it should the state become involved. (Etzioni, 1994; Parsons, p. 53, 2001) Etzioni believes public policy should ?aim to promote and revive those institutions which stand between the individual and the state: family; voluntary organizations; schools; churches; neighborhoods; and communities.? (Parsons, p. 53, 2001) This idea is consistent with the concept of social capital. Olson (1965) is not as hopeful as Etzioni concerning the positive attributes of group or community action. Olson believes large groups will have a difficult time organizing for collective action because there will be a large number of ?free riders? willing to receive the benefits of membership with little or no effort on their part. Olson submits organizations partaking in collective action hurt economic growth because special interest groups lobby for preferential policies, which could impose substantial costs on society. Olson?s argument lies in direct opposition to Putnam?s views concerning associations and civic engagement. Olson wrote ?special interest organizations and collusions reduce efficiency and aggregate income in the societies in which they operate and make political life divisive? (Olson, 1965). Components of Social Capital This discussion familiarizes the reader with the social capital concept and its history, provide a breakdown of its component parts, and provide evidence both 31 defending and disputing social capital?s importance in government performance and economic development. Over the past few decades, social capital has received much attention in academic circles. In simplest terms, social capital is about how people are connected with one another. This loose definition is problematic because it is so broad and can mean ?everything and nothing? (Halpern, p. 1; 2005). Fine (2010) views social capital as a flawed concept wrought with circular reasoning, while others believe it is the ?most important and exciting concept to emerge out of the social sciences in fifty years? (Halpern, 1). Many supporters find social capital appealing because it utilizes economic concepts and language to recognize and quantify the importance of society in the macro economy. Many articles discuss the forms and quality of people?s social networks and a range of important economic outcomes. This research area will likely expand exponentially as social networks and social media continue to shape our daily lives and world events. As stated earlier, social capital is a concept bridging sociology and economics by looking at social phenomena in economic terms. Social capital is essentially a three dimensional concept. The concepts include the basic components, the different types of places or levels of analysis, and the characteristics of social capital. 1. Components ? networks, norms, and sanctions (Halpern, p. 9-10) 2. Levels or domain of analysis ? individual, group, community, nation, etc. (Halpern, 13) 3. Character or function ? bonding, bridging, linking (Gittell & Vidal; 1998) 32 Networks Understanding the component parts of social capital is made simple when we look at examples in our everyday lives. As people, we are rooted in an array of social networks and associations. These are people who regularly associate with for various reasons. These include our friends, coworkers and business associates, the people we play sports with, belong to clubs with, or others, as well as our family, neighbors, and members of our church or ethnic groups (Halpern, 2005). Norms Halpern (2005) points out ?people are connected with one another through intermediate social structures ? webs of associations and shared understandings of how to behave.? These ?shared understandings? are the norms of behavior (p. 3). Norms of behavior are customs developed in different areas, which in reality serve a purpose to help society function better. Living in a community requires certain rules or ?social norms?. Many of the rules of the community are unwritten, and may include helping our neighbors and being courteous and considerate to others. Some norms of behavior are very widespread, while others are very place specific (p. 10). Sanctions The flip side of the norms of behavior is sanctions. There are both positive sanctions (rewards) and negative sanctions (punishment) for behaviors. Most are very informal but are nonetheless effective in maintaining social norms (Luzzati, 2000). Neighborhood living is associated with certain kinds of sanctions on good and bad behavior. Sanctions often appear in very mild but effective forms. Neighbors find ways of communicating their disapproval of acts which violate the unwritten codes of the 33 neighborhood, including a disapproving glance, an angry exchange of words, vulgar hand gestures, or even the threat of action. Sanctions include negative gossip and loss of reputation, while praise serves as a positive sanction (Luzzati, 2000). Trust Trust is an important concept embedded into networks, norms, and sanctions. The most important norm in successful societies is the concept of trust. Individual?s lack of trustworthiness will be sanctioned by the exclusion from networks. Axelrod (1984) states people in high trust states and regions may generally be ?nicer? to one another. Both friends and strangers may be more pleasant making everyday life easier with less conflict. The existence of social capital, specifically trust, has other benefits for the individuals and communities within it. James Coleman (1988) discusses the New York wholesale diamond market in his influential paper on social capital. In this paper, Coleman discusses how the diamond merchants hand over thousands of dollars in diamonds to other merchants to examine without using expensive contracts and insurance. Yet, the market is extremely efficient and successful. This market only works because of the closeness and high degree of trust and trustworthiness among the community of merchants. This custom of behaving honorably is an immense asset which allows them to trade efficiently and profitably. However, the assets of this community cannot be viewed as holding financial, physical, or even human capital. This network is enjoying the benefits of ?social capital? (Coleman 1988). Communities with high amounts of social capital tend to have people who trust each other more because the networks in their community provide better opportunities to punish deviants (Coleman, 1990). 34 The concept of the social network has been changing. Our social relationships are not always experienced as positive and can be characterized by rivalry and dislike. The people who live within a neighborhood are all part of the social network of the community. The network may be defined geographically or formally. Boundaries may be ill defined, and can be characterized by its density and closure (the preponderance of intra-versus inter-community links.) (Halpern, P. 10, 2005) One can argue three basic components of social capital are found in contexts ranging from the very intimate, such as in the family, to super-communities such as the nation-state. The components largely define social capital structures. There is much debate over how far reaching the social capital concept should be considered as a tool for understanding societal phenomena. Levels of Social Capital Researchers vary over the range of subjects which should be included in the social capital concept (Halpern, 2005). Researchers have attached social capital to social trust (Boix and Posner, 1998; Knack & Keefer, 1997; Narayan and Pritchett, 1997; Svendsen and Svendsen, 2003). They have joined the concept with the idea social networks enable some immigrant and ethnic groups to succeed while others fail (Fukuyama, 1995). Social capital allows for the study of practices and habits of successful communities (Grisham, 1999) (Eschbach, 1997). It provides insight into the types of parent networks helping schools and students succeed (Teacherman, et. al., 1997). Social capital is a vehicle to study voluntary associations of almost any kind (Baumgartner and Walker, 1988; Verba, et. al. 1995); as well as neighborhoods (Berry, 2007); sports and special interest clubs; (Charles, 1993; Miller, 2003). The concept of social capital helps us better understand the 35 social networks of friends as well as organizational diversity (Eastis, 1998). It helps us understand economic development (Fedderke, de Kadt, Luiz, 1999; Knack & Keefer, 1997; Bardhan, 1993; Guiso, et. al., 2004). Social capital helps us understand politics (Jackman & Miller, 1998); as well as government and democracy (Paxton, 1999; Skocpol, 1996. 1997, 1999; Knack, 2002). It gives us a way to better understand the structure and character of families, from the presence of two parents in the home to the frequency to which families eat together as a whole. (Astone, 1999) The social capital term has been used to also describe large-scale ?cultural? phenomena. At the same time, it can be used to describe very small-scale, micro-level family phenomena. Ben Fine, arguably the most vocal critic of social capital, dismisses social capital as ?a totally chaotic, ambiguous, and general category that can be used as a notional umbrella for almost any purpose? (Fine, 2001, p. 155). Fine?s criticisms have merit, as some authors have stretched the meanings of networks, norms and sanctions to refer to unrelated concepts. Some concepts, for example, measuring the value of trust in a business relationship are considered a legitimate use of the social capital concept; other concepts such as, i.e., the level of trust among complete strangers is more controversial. National Customs Affect Social Capital Researchers disagree as to whether the character and form of relationships between relative strangers is to be considered a form of social capital. When visiting different nations, one cannot help but be struck by the differences in how people commonly behave. Southern Europeans think the British custom of forming and standing in lines is odd, while the British get very angry with overseas visitors who try to jump the 36 line (Van Oorschot, Arts, & Gellisen; 2006). Are behavioral customs quaint cultural differences or are they important aspects of social capital? Does forming lines facilitate the ability of a nation?s population to get along? In this sense, many aspects of national and regional culture fit the loose definition of social capital. At the macro-level, social capital allows investigation of national economic performance; regional effects within the nation, the relationship to government, institutions, and culture; the formation of national economies; and globalism (Van Oorschot, Arts, & Gellisen; 2006). Fukuyama (1995) spoke extensively on how the societal norms, specifically general trust within nations affected the overall economic well-being of the nation. Fukuyama noted although American, German, and Japanese customs were all very different, they all had the same tendency of being very trusting of strangers. This tendency is very different from the Italian and Chinese cultures which have very high levels of trust within the family only. In cultures such as the United States, wealth was created in the form of large corporations. This is the opposite of the culture in China, as business firms tend to only be as large as the ring of trust within the extended family. Although the U.S. has benefitted from a high level of social capital in the past, it may not in the future. Putnam (1995) suggested the United States has over the years become a much less trusting nation and is now losing its store of social capital. The trend of decreasing social capital on the national level will have a negative effect on the level of social capital on the community level. This loss of social capital will effectively serve as a tax on individuals and communities as the loss of trust in society leads to an increased number of lawsuits, and raises crime rates. 37 Individuals affect social capital Some theorists have demonstrated social capital has an effect on the personal or individual level. Astone (1999) found the acquisition and maintenance of social capital is a major motivator of human behavior. She found the formation of sexual partnerships, and the birthing and rearing of children involves social capital, and noted an individual?s stock of social capital is handed down to future generations in virtually all societies. Teacherman, et. al., (1997) found social capital plays a significant role in whether or not young people drop out of school. Obviously, understanding how social capital can motivate individuals in positive ways has great potential in improving the economic vitality of both communities and the nation. Portes (1998) declared, ?I believe that the greatest theoretical promise of social capital lies at the individual level? (p. 21). Ibarra, Kilduff, & Tsai (2005) agree by saying the study of social capital on the micro-level allows researchers to examine ideas like whether or not investing in social capital make you wealthy? Ibarra, Kilduff & Tsai continue by suggesting social capital helps researchers better understand how a community can improve educational outcomes to provide for a better community and economic development environment. Communities Affect Social Capital Much has been written about social capital on the meso (i.e., community) level. Grisham (1999) has written extensively on how the building of social capital over sixty years turned Tupelo, Mississippi from a poor to prosperous community. Putnam?s 2003 book Better Together gives countless examples of how communities, neighborhoods, churches and associations came together to accomplish goals and built essential social 38 capital in the process. The study of social capital at the community level explains how to better neighborhoods and communities, how to utilize social capital in the firm to improve long-term profits, and the advantages of creating industry clusters to improve economic development (Kilpatrick, Field, & Falk; 2003). By understanding what makes people come together to achieve common goals, and build well functioning communities that attracts new people and businesses, we can better learn how to build strong communities throughout the country, improve the lives of all citizens, and increase economic prosperity for everyone. Nations, communities, and individuals are all connected to social capital. Therefore, it is necessary to include definitions of social capital which exist on the individual, community, and national levels. Social capital can be found in small groups. National social capital is comprised of the sum of the variables of the individual or community levels. This concept can be realized when we think of how the rate of high school education completion within the United States affects the level of federal income tax receipts, size of the welfare rolls, and unemployment rate. (Svenden, 2006) Function and Character of Social Capital Bonding and Bridging Social Capital Recent theoretical work has sought to break the notion of social capital down into different sub-types. Perhaps, the most important distinctions are between ?bonding? and ?bridging? social capital. Bonding social capital is either by choice or necessity, inward looking, and tends to reinforce exclusive identities and homogeneous groups. Bonding social capital is essentially the ties individuals have with close friends and family. This form of social capital gives the individual emotional support, and helps us cope with our 39 daily lives. Bridging social capital is outward looking and includes people across diverse social divisions. With bridging social capital, the individual has loose ties to other individuals. Loose ties are ideal when you are looking for business contacts, or lead to find a new job. Your loose ties are the people you know from little league, or church, or the PTA. ?Bonding social capital provides a kind of sociological superglue whereas bridging social capital provides a sociological WD-40? (Putnam, 2000, pp. 22-23). Putnam credits the coining of the bonding-bridging distinction to Gittell and Vidal (1998). This is in contrast with Granovetter?s (1973) use of ?weak ties? and ?strong ties? to discuss social networks. Bridging and bonding has attracted widespread use in a very short period of time. While the bridging-bonding distinction may be important in some cases, it may not be necessary to always measure both bonding and bridging social capital as an individual or community rich in one kind of social capital, will probably be rich in the other (Svenden, 2006). Linking Social Capital Szreter (2002) studied the concepts of bridging and bonding social capital and offered the idea of a fundamental relationship between social capital and the state. He found evidence to suggest power, politics, and ideology helped account for historical trends in social capital formation and deterioration. Putnam?s study of Italy (1993) is consistent with Szreter?s finding as he found the domination of the Catholic church in Southern Italy between the 12th and 19th centuries impeded the ability of the people to work together to achieve common goals in a democratic fashion. Linking social capital describes the relationship citizens have with people in power. It refers to relations between individuals and groups in different social strata in a 40 hierarchy where power, social status and wealth are accessed by different groups (Cote and Healy, 2001:42). Woolcock (2001) extends this to include the capacity to leverage resources, ideas and information from formal institutions beyond the community. One might think of linking social capital in terms of how easily the individual can contact and communicate with people who have financial or political power. Historical evidence suggests bridging and respectful forms of linking social capital only flourish when there is ideological and political support for ?the state,? local participation in government, and supportive to the needs of all citizens in the community. A high regard for the state and the activities through which it instills a sense of collective pride, and a high evaluation of the services provided by all levels of government are essential for citizens to respect and value each other, value each other?s differences and give their time in trusting, cooperative activities. When this respect for the state and the larger public is absent or fails, bridging and linking social capital diminish and, in extreme cases, leave only a social landscape of isolated camps of people with only bonding social capital (Szreter, 2002). Szreter (2002) continues by stating social capital is not an alternative to ?the state.? The two concepts are interwoven. Szreter argues for societies and communities to achieve healthy balances of bonding, bridging, and linking social capital. He further states the best way to build the right amounts and combinations of social capital are to restore ?collective faith? in the state and local governments. Unfortunately, since social capital is a public good, there tends to be an under- investment, as it is not the sole property of single individuals and is vulnerable to free- riding. Being part of a social network, or living in a community where cooperation and 41 helpfulness are widespread, provides benefits to the individual whether or not they do anything to maintain the network. In practice however, many forms of networks are not fully public goods as they are not equally accessible to everyone. In this sense, social capital may only be a semi-public or club good. In some cases, it may exist in forms wider group would regard as bad or pathological such as the mafia (Putnam, 1993). Edwards and Foley (1998) suggest it is not sufficient simply to describe the size and density of a person?s network. We must also look at the resources connecting individuals to networks. Edwards and Foley (1998) continue by suggesting researchers have estimated the levels and types of resources individuals receive from their social networks, and have documented differences in the materials and emotional benefit support available across social classes. An awareness of the private goods aspects of social capital obliges us to build a consideration of power and resources into the concept, and recognize its club good aspects (Szreter, 2002). Woolcock (1999) has looked at the social capital framework in relation to the power of the state and the elites who control it. Woolcock (1999) argues an important characteristic of state-society relations is how closely tied, or embedded, the state is to the society over which it presides. Linking social capital may be viewed as a special form of bridging which specifically concerns power ? it is a vertical bridge across asymmetrical power and resources. High levels of bridging and linking indicate a highly interconnected society, sharing power and resources through a never-ending and evenly spun web of connections. If the society is characterized by low levels of bridging and linking then, depending on its underling level of inequality, we will get a very varied picture of its social capital at the micro or individual level (Svenden, 2006). 42 Associational Density, Civic Engagement, and Community Involvement The preceding literature provided an in-depth starting point to provide the necessary insight in determining what is important when answering the question: ?Does social participation influence economic wealth on the city level?? The remainder of the literature will concern how specific aspects of social capital notably associational density, civic engagement, and community involvement affect government performance and economic development efforts and wealth, and how government performance affects development efforts and wealth. Associational Density For the purpose of this study, associational density is the number of Putnam style or Olson style groups within a city by population. Putnam groups are associations and civic organizations which give participants a sense of shared endeavors. Olson groups are associations which meet for the purpose of lobbying government for special benefits. Knack (2003) notes the conflict Putnam and Olson provide the social sciences concerning the influence private associations have on society and the economy. Olson (1982) hypothesized groups lobby government for special benefits such as tariffs, tax breaks, subsidies or regulations which inhibit competition, which is inefficient, reduces investment, slows the rate of innovation, and ultimately reduces growth (61-65). Putnam (1993) viewed groups more favorably than Olson, as he noted associations give individuals a greater sense of trust and increases the number of their social ties. Associations ?instill in their members habits of cooperation, solidarity, and public spiritedness? and participation in civic organizations creates a sense of shared responsibility for collective endeavors? (Putnam, 1993; Knack, 2003). 43 Putnam analyzed data across Italy and found areas in Northern Italy with a greater inclination for associational groups were far more economically advanced than their counterparts in Southern Italy who were much less predisposed to participating in associations. To gain a better understand this conflict between Putnam and Olson, Knack theorized groups could be categorized as ?Olson? style or ?Putnam? style groups. Knack used the World Values Study (WVS) to create a cross-country analysis to determine the effectiveness of different type groups in creating prosperity. Putnam style groups were identified as organizations promoting trust and cooperation. Putnam groups include civic and social organizations, bowling centers, golf and country clubs, fitness clubs, sports organizations, and religious organizations. Olson style groups were identified as rent-seeking groups, or have a financial incentive to form and join. Olson groups include political, labor, business, and professional organizations. Knack found little support of Olson and mixed support for Putnam?s claims concerning citizen participation and economic wealth. Questions remain about the types of participation most needed, and its overall effects particularly in cities within the United States. Therefore, this paper will study both Putnam and Olson style groups. Civic Engagement The concept of civic engagement combines the trust and social norms embedded in social capital and unite it with the concept of civic participation. This concept allows us to better understand why democracy and capitalism are so closely related. Thomas Jefferson stated, ?when the people are afraid of the government, it is called tyranny, and when the government politicians are afraid of the people, it is called democracy.? (University of Virginia E-text, Jefferson Digital Archive) A healthy capitalist economy 44 requires there be a sufficient amount of civic engagement to allow businesses, individuals, and networks to be self-organizing for both commerce and governance. The literature concerning civic engagement indicates greater participation of the general public in government affairs has had a positive effect on democracy, and further has led to greater government accountability and performance, and greater economic development. Fukuyama (1995) hypothesizes a healthy capitalist economy is one which has a sufficient amount of civic engagement in the underlying society to permit groups to be self-organizing. Although governments can and do promote key firms and sectors, free markets almost always work more efficiently when private actors make economic decisions. At the same time, democratic societies cannot exist if society consists only of unorganized, isolated individuals who can only express their opinions at the ballot box. Their weaknesses and separateness would not allow the people to express their views properly, and would be an open invitation to despotism and demagoguery. Fukuyama (1995) further surmises this lack of trust and civic engagement in the U.S. creates greater costs for tax payers, as the nation already pays significantly more than other industrialized economies for security, police protection, and attorney fees than other advanced nations. The increased costs from a lack of trust and civic engagement amount to a measurable percentage of gross domestic product annually, and essentially amounts to a direct tax on the public. Fukuyama continues by stating the United States has been living off a fund of social capital, and specifically civic engagement. He says the energizing civic engagement is both complicated and mysterious. While government can enact policies decreasing trust in society, they have not found ways to enact policies meant to increase the trust and participation in civic engagement. 45 Keele (2007) demonstrated just how difficult it is to increase trust in society by showing even though congressional performance arguably improved in the 1990s, the trust in Congress remained low. Keele continued by suggesting a lack of trust in government makes it more difficult for political leaders to succeed as they become pinned into positions by constituents, and cannot compromise for the good of everyone involved. Szreter (2002) suggested our level of trust in society would increase if governments restored the collective faith in both central and local governments, and in the depleted social services, and submits civic engagement is best used as a tool to analyze how citizens use their relationships to engage or disengage in the business of the state. Paxton (2002) found civic engagement promotes democracy and economic development, and suggests foundations and agencies funding non-profit organizations should consider how an organization cuts through society in making funding decisions. Under Paxton?s recommendation, Civitan or Lions Club type groups would receive funds over organizations such as battered women or homeless shelters. Paxton supports this notion as quantitative research has consistently demonstrated a strong relationship between groups bringing people together from all walks of life, economic development and democracy. Why is civic engagement as part of social capital important to government performance and economic development? Often government officials have difficulty knowing the needs of the population. This problem is most evident when there are low levels of civic engagement within the community. When citizens are informed and actively participate in the political process, government officials become more attuned to 46 the demands of the citizenry. Active participation by the citizenry takes many forms. An involved public takes part in the community by reading newspapers, attending public forums, giving to political campaigns, voting, and by becoming involved in volunteer groups involved in the betterment of the neighborhood or community. This involvement, which makes government more responsive to the citizenry results in a more livable community, makes the city more attractive for business recruitment, and allows government leaders to pursue economic development projects which would not otherwise be approved (Rice, Sumberg: 1997). Weil (1994) supported the idea of civic engagement as a pre-condition of economic development by concluding the ?civic community index? based on organizational density, newspaper readership, and electoral characteristics have an extraordinarily strong correlation with government performance including economic development (Weil: 1994). Swank (1996) provided additional evidence by arguing values embodied in civic engagement, especially values emphasizing collective action such as people coming together to attain community goals, explain 84% of the economic growth of 25 countries between 1960-1989 (Swank: 1996). Stagner and Duran (1997) argue economic growth and neighborhood problems are more readily addressed by increasing the civic engagement of individuals within the governance of programs. They suggest through the implementation of active economic development through Comprehensive Community Initiatives (CCIs), social service agencies were more effective in helping to improve the lives of children and families in extreme poverty by providing better services, which led to a more capable citizenry, which led to greater economic development. (Stagner, Duran: 1997) 47 Evans (1997) argues civic engagement creates social trust, which in turn facilitates civic engagement, effective government, and economic development. This assertion is supported by Tolbert, Lyson, and Irwin (1998) who suggest the combination of local capitalism and civic engagement lead to positive local socioeconomic outcomes (i.e. economic development). They argue localities high in civic engagement will have an abundance of small manufacturers, which in turn, promotes economic development. Small town institutions promote ?horizontal ties? cutting across diverse groups which foster civic engagement, boosts competitiveness, and promotes local capitalism. (Tolbert, Lyson, Irwin: 1998) Irwin, Blanchard, Tolbert, Nucci, and Lyson (2004) suggest a community?s long term economic vitality and development depends on the attachment and commitments citizens make to communities which can only be developed through civic engagement. Ball (2001) argues the strength, scope, and dimensions of civic engagement certainly influence economic development as the widening of people?s networks of interaction and exchange provides economic opportunities for individuals and society. Saunders (2002) agrees civic engagement is an essential component of economic development efforts, and state community self-development projects are now being recognized as an essential ingredient for economic development. (Saunders: 2002) Meyer (2003) suggests political participation/civic engagement plays an essential role in any democracy, but citizens and political theorists differ on whether democratic legitimacy and stability rest on engaged participation or on a somewhat less engaged consent. Meyer goes on to suggest the importance of civic engagement in democracy is a myth not supported by hard evidence. Carothers and Barndt (1999-2000) disagree with 48 Meyer and others suggesting not all civic engagement and interaction is good. Carothers and Barndt go on by suggesting some groups work together to produce reprehensible outcomes, and what makes for the public good is highly debatable. Although clean air is desirable, many would argue low energy costs are desirable as well. Harriss (2001) argues factors other than local civic engagement are not essential to economic development, and argues communities must reach out to external linkages. The inward looking, political participation making up civic engagement is ultimately not very important. Community Involvement Community involvement is discussed in the literature in terms of its ability to influence government performance and economic development. Communities across the country have adopted policies of self-development (Fosler, 1989; Blakely, 1989; Gittell, 1990; McGuire, et. al., 1994). It is a process of bringing the citizens of the community together to find ways to solve community problems and improve economic vitality. Small communities especially benefit from an involved public. The governments in small communities tend to lack the administrative capacity of larger communities to perform the functions of grant writing, acquisition, information technology, and financial management (Mead, 1986). Community involvement allows communities to overcome shortcomings through synergistic efforts. Communities with a high capacity for development successfully balance controlling or coordinating development activities and allowing the public to participate in the development process. (Gittell, 1990) Community involvement is generally thought to contribute to positive government performance and economic development in cities of all sizes, as it allows local groups an 49 outlet to communicate with public administrators, enables individuals to participate in development, and allows grass-roots organizations to provide services essential for the self-improvement of the community. Community involvement is again an important part of how society interacts with government and the economy and will be included in this study. Tupelo, Mississippi serves as an excellent example of how citizens can bond together to achieve common goals. Grisham (1999) gives a detailed account when community is achieved and people learn to work toward common goals. Grisham spent six years of detailed study of the community. He read newspaper accounts going back 120 years, reviewed public records, school and church records, library materials and personal memorabilia. He reviewed all of the records of the Community Development Foundation, attended its executive sessions, and interviewed over 2000 people. (Grisham, 1999) The question asked was, ?What gives Tupelo its advantage?? The answer to the question was ?The citizens of Lee County have learned to work together.? (Grisham, 1999) Tupelo?s ultimate goal was to become a ?competent community.? Leonard Cottrell (p. 6-7, 1977) describes a competent community as ?one in which the various component parts of the community: (1) are able to collaborate effectively in identifying the problems and needs of the community; (2) can achieve a working consensus; on goals and priorities; (3) can agree on ways and means to implement the agreement; and (4) can collaborate effectively in the agreement of actions.? Grisham argues it is very difficult to become a ?competent community.? There is a common tendency for people to work 50 towards their own goals without recognizing the commonality of interest and problems which might bring citizens together with a common purpose and sense of community. The next section will discuss the interactions between social capital, government performance, economic development effort, and economic wealth and development. This dissertation theorizes social capital affects local government performance, economic development effort, and economic wealth and development. Social capital and government performance There are two basic ways social capital can improve governmental performance. First, it can increase governmental accountability. Social capital enhances the political involvement of citizens, making it easier to overcome the collective action problem of paying attention to and keeping track of the government. It inspires activities like monitoring officials, protesting, and voicing preferences, which can make the government more responsive to the needs of the citizenry at large as opposed to special interests. Citizen involvement activities help eliminate waste, fraud, inefficiency, and incompetence through detection or deterrence. When there is a fund of social capital, ?free riding? is less frequent and government performance can be improved by affecting the level and character of political participation, reducing ?rent-seeking,? and enhancing ?public-interested behavior? (Knack, 2002). Second, social capital can make government more efficient. It encourages cooperation and public spiritedness among officials and administrators; which help counteract gridlock and polarization. Social capital leads to ?greater innovation and flexibility in policy making,? thus allowing for the creation of policy which can more easily respond to crises or take advantage of opportunities. 51 Social capital and economic wealth Social capital enables firms to improve their innovative capability, facilitates business transactions, cuts coordination costs, and enhances the division of labor. Maskell (2000) states social capital influence the level of mutual trust within a community, and effects long-term economic performance as the positive or negative levels of trust builds upon itself. Communities with greater social capital should have greater trust, and a greater level of care for the fellow man. Because of this, economic building blocks such as health, education, and welfare are also improved. Putnam (1993) relates higher levels of social capital to people being more involved in all types of community organizations. Greater involvement in the community at large often includes community self- improvement projects which lead to economic development (McGuire et. al., 1994). At first glance, one would think increased development efforts would automatically translate into economic wealth. This may or may not be the case as some localities are blessed with positive economic growth with little or no effort. This is often the case with suburban growth. At the other extreme, rural and inner cities may be forced through circumstances to spend countless hours on economic development efforts hoping the hard work and determination pays off in providing just a few new jobs. Government performance and economic development efforts Government performance likely affects economic development efforts within a locality. Economic development efforts are often a high priority for communities. Fleishmann, Green and Kwong (1992) notes local officials are often criticized for using a large variety of incentives, organizational plans, analytical techniques, and processes to 52 promote development because such policies have a very limited effect on business location decisions. Scholars discuss variations in the development tools used by cities, and provide two competing theories. One theory is based on broad economic and political systems (structure) and another relies on the actions of local political and economic actors (agency) (Fleishmann, Green, Kwong; 1992). The underlying premise of structural theories is urban-development is shaped by economic and social conditions beyond the control of local policy makers. Peterson (1981: 20) argues cities must promote their ?interest,? i.e., ?the economic position, social prestige, or political power of the city, taken as a whole.? Local officials act in response to this pressure by competing with other cities to attract new firms and residents and to keep existing taxpayers from moving. Structural theories imply cities adversely affected by broad economic, demographic, and political forces, will be more likely to adopt development policies. This is also true for communities dependent on manufacturing. Economic well being may vary with the metropolitan status of a community. Slow growth or outright decline may make cities more vulnerable to pressure to promote growth (Rubin and Rubin 1987), while rapidly growing places (primarily suburbs) feel little need to stimulate development and even try to limit growth (Baldassare 1986). In the agency model, emphasis is placed on leadership, coalition building, organization, and political influence. Logan and Molotch (1987) link development to ?growth machines? comprised primarily of politicians, the local media, retailers, utility 53 companies, developers, realtors, mortgage companies, and similar interests who benefit from the increased value of particular pieces of property. There are several actor-centered theories which can affect development policy. Development policies are more likely to be adopted in cities with a mayor-council government because mayors are expected to be more responsive to citizen and group pressures than are politicians in cities using the council-manager plan (see Feiock and Clingermayer 1986). Activism by pro-growth coalitions should result in projects created by government or public-private partnerships due to the limited authority of the private sector to condemn land or issue municipal bonds (Mollenkopf 1983; Ottensmeyer et al. 1987; Blakely 1989: 252-64). Cities with greater bureaucratic capacity (staff size, expertise, and experience) should be able to implement more development policies (Rich 1989). Moreover, cities may employ more economic development tactics when they have a specialized agency to administer them (Fleischmann and Green 1991; Rubin 1989). Case studies stress the importance of strategic planning for successful development programs (e.g., Blakely 1989: 72-90). The relationship between use of a plan and the number of development policies a city adopts is ambiguous, however (Fleishmann et. al.; 1992). Government performance and economic wealth The role society plays on government performance, and consequently economic wealth should be studied. Government performance can and does influence economic wealth as a stable and predictable environment is needed for businesses to locate, grow, and flourish. Wei (2000) examined global capital inflows into China and found 54 government performance, or more specifically government corruption had a significant negative effect on capital inflows into China. Golberman and Shapiro (2003) went on to suggest Foreign Direct Investment (FDI) made by United States companies were dependent on the ?governance infrastructure?, which included particular aspects of the legislatures, regulations and legal systems which condition freedom of transacting, security of property rights, and transparency of government and legal processes. Further, King (2004) theorizes when multiple jurisdictions to choose from, efficient markets for public services arise, and suggests citizens move to jurisdictions offering services they value and for tax rates they are willing and able to pay. Well performing governments are efficient, competent, and responsive to the citizenry. Putnam (1993) revealed a correlation between government performance and the level of economic development in Italy. Specifically, Putnam found regions with more professional, responsive governments were also more economically advanced, and the government performance of the region was at least in part responsible for the differences in economic prosperity. Knack and Keefer (1997) examined the effects of government performance on economic development in 27 countries. They concluded government performance has a significant effect on economic growth and development. Summary This review of the literature provided the reader with an understanding of the many facets of the social capital concept, and how it influences both government performance and economic development. This review discussed the development and scholarly foundations of the social capital concept, and then related it to government performance and economic development. 55 The greater part of this literature supports the notion social participation has a positive effect on both government performance and economic development. However, some authors refute this notion by arguing participation by the general public hinders government?s efforts to provide for the citizenry, and is counter-productive. The model presented in chapter 3 will address these concerns and will advance the literature in determining ?Does social participation influence economic wealth on the city level? 56 CHAPTER 3: RESEARCH DESIGN Introduction Chapter 2 provided a scholarly examination of the literature to provide insight into how and to what degree social participation influences government performance, economic development efforts and economic wealth on the local level. The literature review discussed the scholarly foundation of the social capital concept, and how social capital relates to government performance, economic development efforts and economic wealth. The previous literature leads to the question: Does social participation influence economic wealth on the city level? One may examine the social environment by studying the many aspects of social capital. A cross-sectional study will examine whether participation by the citizenry is related to government performance, economic development efforts, and economic wealth on the city level. Not all group participation is created equally. Knack (2003) noted that Putnam and Olson provided the social sciences conflicting insights into the influence private associations have on society and the economy. Olson (1982) suggested groups lobby government for special benefits such as tariffs, tax breaks, subsidies or regulations. Olson argued special benefits inhibit competition, create inefficiency, reduce investment, slow the rate of innovation, and reduce economic health (61-65). Putnam (1993) viewed groups more favorably than Olson, noting associations give individuals a greater sense of trust and increase the number of social ties. Associations ?instill in members habits of cooperation, solidarity, and public spiritedness? and participation in civic organizations creates a sense of shared responsibility for collective endeavors? (Putnam, 1993; Knack, 2003). 57 The literature concerning civic engagement indicated greater participation of the general public in government affairs has had a positive effect on democracy, leading to greater government accountability, performance, and economic development. Fukuyama (1995) hypothesized a healthy capitalist economy is one with a sufficient amount of civic engagement in the underlying society to permit groups to be self-organizing. Although governments can and do promote key firms and sectors, free markets almost always work more efficiently when private actors make economic decisions. At the same time, democratic societies cannot exist if society consists only of unorganized, isolated individuals who can only express their opinions at the ballot box. Fukuyama (1995) believes a lack of trust and civic engagement in the U.S. creates greater costs for tax payers, as the nation already pays significantly more than other industrialized economies for security, police protection, and attorney fees than other advanced nations. The costs incurred from a lack of trust and civic engagement is a measurable percentage of the annual gross domestic product and a direct tax to the public. Community involvement is discussed in the literature in terms of its ability to influence government performance and economic development. Communities across the country have adopted policies of self-development (Fosler, 1989; Blakely, 1989; Gittell, 1990; McGuire, et. al., 1994). It is a process of bringing the citizens of the community together to find ways to solve community problems and improve economic vitality. Small communities especially benefit from an involved public. The governments in small communities tend to lack the administrative capacity of larger communities to perform the functions of grant writing, acquisition, information technology, and financial management (Mead, 1986). Community involvement allows communities to overcome 58 shortcomings through synergistic efforts. Communities with a high capacity for development successfully balance controlling or coordinating development activities and allowing the public to participate in the development process. (Gittell, 1990) Community involvement contributes to positive government performance and economic development. It allows local groups a method to communicate with public administrators enabling individuals and grass roots organizations to participate in government services. The role society plays on government performance, and consequently economic wealth is addressed in this study. Government performance can and does influence economic health as a stable and predictable environment is needed for businesses to locate, grow, and flourish. Golberman and Shapiro (2003) suggested Foreign Direct Investment (FDI) made by United States companies were dependent on the ?governance infrastructure?, which included particular aspects of the legislatures, regulations and legal systems. The governance infrastructure affects the freedom of transacting, security of property rights, and transparency of government and legal processes. Further, King (2004) theorized with multiple jurisdictions to choose from, efficient markets for public services arise. King suggested citizens move to jurisdictions offering services that citizens value and for tax rates citizens are willing and able to pay. ?The Production of Social Capital in U.S. Counties? by Rupasingha, Goetz, and Freshwater (2006) provides a tool for analysis of social capital on the county level. Census data, county business patterns, and information concerning charitable contributions were used as proxies for social capital. The data collected were analyzed, and cross-referenced with data results from the General Social Survey (GSS) and the University of Michigan?s World Values Survey (Rupasingha, et. al). The development of 59 reliable social capital data on the local level provides the opportunity for greater in-depth analysis of how social capital affects government performance and economic development. Although Rupasingha, et. al. compiled the social capital data on the county level, the same techniques can be used on the zip code level to find indicators on the city level. Goldfinger and Ferguson?s ?Social Capital and Governmental Performance in Large American Cities? provides an analysis of how social capital affects managerial performance at the local, state, and national levels by analyzing general reciprocity and civic engagement?s effects on managerial performance. Social capital data was collected through the use of telephone surveys of 1,820 respondents in 18 cities to ask six questions pertaining to the significance of trust and civic engagement in communities. The dependent variable, managerial performance, was taken from the Government Performance Project (Barrett and Greene, 2000). By combining Rupasingha, et. al., methods of creating a proxy measure of social capital, with Goldfinger and Ferguson?s ideas about the connection of social capital and government performance, one can measure the connection between social capital and government performance. However, Goldfinger?s study of the connection between social capital and government performance only covered 18 cities, and the government performance project, which served as the dependent variable in Goldfinger?s study, only contained 35 cities. This dissertation extends the previous studies by examining both social capital and government performance in terms of economic wealth on the city level. The focus of this study is to determine if social capital, government performance, and economic development efforts contribute to economic wealth. 60 Research Questions and Hypotheses This dissertation poses the questions: Does social participation influence economic wealth on the city level? And if so, does the social participation affect wealth directly, or did it affect wealth by improving the performance of the city government, and / or improve the economic development efforts within the city. Specifically, this dissertation asks: Q1: Does social capital affect municipal government performance? H1: In comparing American cities, social capital within the city positively affects local government performance. There are two basic ways social capital can improve governmental performance. Social capital can increase governmental accountability. Social capital enhances the political involvement of citizens, alleviating the collective action problem of paying attention to and keeping track of the government. Social capital inspires activities like monitoring officials, protesting, and voicing preferences, which can make the government more responsive to the needs of the citizenry at large as opposed to special interests. Social capital activities help eliminate waste, fraud, inefficiency, and incompetence through detection or deterrence. When there is a fund of social capital, ?free riding? is less frequent and government performance can be improved by affecting the level and character of political participation, reducing ?rent-seeking,? and enhancing ?public-interested behavior? (Knack 2002, 773). Social capital can make government more efficient. Social capital encourages cooperation and public spiritedness among officials and administrators; these qualities help counteract gridlock and polarization. There is evidence social capital leads to ?greater innovation and flexibility in policy 61 making,? thus allowing for the creation of policy can more easily respond to crises or take advantage of opportunities (774). Q2: Does social capital affect economic development efforts and wealth? H1: In comparing American cities, social capital positively affects economic development efforts within the city. H2: In comparing American cities, social capital positively affects economic wealth within the city. H3: In comparing American cities, economic development efforts positively affect economic wealth. Social capital enables firms to improve their innovative capability, facilitates business transactions, cuts coordination costs, and enhances the division of labor. Maskell (2000) stated general reciprocity (a form of social capital) influences the level of mutual trust within a community, and effects long-term economic performance as the positive or negative levels of trust builds upon itself. Communities with greater social capital should have greater trust, and a greater level of care for the fellow man. Because of social capital, economic building blocks such as health, education, and welfare are improved. Putnam (1993) related higher levels of social capital to people being more involved in all types of community organizations. Greater involvement in the community at large often includes community self-improvement projects for economic development (McGuire et. al., 1994). Intuition would suggest increased development efforts would automatically translate into economic wealth. It may or may not be the case as some localities are blessed with positive economic wealth with little or no effort. Suburban growth is a prime example of how a city can grow without herculean development efforts. At the other 62 extreme, rural and inner cities may be forced through circumstances to spend countless hours on economic development efforts hoping hard work and determination pay off in providing just a few new jobs. Q3: Does municipal government performance affect economic development effort and wealth? H1: In comparing American cities, municipal government performance positively affects economic development efforts. H2: In comparing American cities, municipal government performance positively affects economic wealth. H3: In comparing American cities, economic development efforts positively affect economic wealth. One can argue, well performing governments are efficient, competent, and responsive to the citizenry. Putnam (1993) revealed a correlation between government performance and the level of economic development in Italy. Specifically, Putnam found regions with more professional, responsive governments were also more economically advanced. Putnam found the government performance of the region was at least in part responsible for the differences in economic prosperity. Knack and Keefer (1997) examined the effects of government performance on economic development in 27 countries. They concluded government performance has a significant effect on economic wealth and development. Government performance likely affects economic development efforts within a 63 locality. Economic development efforts are often a high priority for communities. High functioning communities will likely be competent in its economic development efforts. The high government performance gives the community a boost. The community is attractive because it is well-functioning, and then as part of its strong operations, it possesses a strong competent economic development effort. In this case, a high functioning government leads to a highly efficient economic development effort, which in turn leads to positive economic wealth and development. Research Model The various factors identified in the hypotheses culminate in the model presented below in Figure 3.1. The model depicts six factors influencing economic wealth in 2004 and the direction of the influence. In the model design, there are four independent variables, all of which represent some form of social capital, two intervening variables, and one dependent variable. The independent variables include associational density, civic engagement, and community involvement. The independent variables will be used as predictor variables for the dependent variable in the regression model, and path analysis. Government performance and economic development efforts are the intervening variables in this model. Government performance is an intervening variable because it is a result of actions influenced by the amount and kinds of social capital, specifically by the associational density, civic engagement, and community involvement. Economic development efforts within the community reflect both the amount and kinds of social capital within the community as well as the overall government performance of the community, and should serve as a direct pre-cursor to economic wealth. 64 Figure 3.1 Variables: Independent, Intervening, and Dependent Independent Variables Dependent Variable Putnam Style Groups Economic Wealth Olson Styles groups Civic engagement Community Involvement Intervening Variables Government Performance Economic Development Efforts Description of Population The International City / County Management Association (ICMA) provides excellent resources for researchers. With a mission of creating excellence in local governance by developing and fostering professional local government management worldwide, ICMA provides broadly administered, well recognized surveys often used by researchers in political science. (http://icma.org/en/icma/about/organization_overview). ICMA conducts periodical surveys of 9,000 plus cities using widely accepted statistical techniques. Each survey is conducted every five years and is conducted on a rotating basis. The 2004 ICMA Economic Development Survey is used in this dissertation. The 2004 ICMA Economic Development Survey was sent to 3,703 top administrators in city or county governments. Of these, ICMA received 726 responses, for a response rate of 19.6%. 2009 survey data was available but not chosen as both survey results and economic wealth data may be outliers due to an unusually weak U.S. economy. Since proxies for social capital data are essentially available for every zip code in the United States, the number of cities used in our study is only limited to the number of reliable measures of government performance and economic development. This study requires each measure be on the same geographical level, and data to be available for all 65 measures. Since the studies proxies for social capital are available for all U.S. cities, we are only limited by the number of cities responding to the ICMA Economic Development survey. There were a total of 726 municipalities who completed the 2004 ICMA Economic Development survey. 85 responses were on the county level and will not be used. Therefore, a total of 641 places listed as cities, townships, or boroughs will be used in this study. Data Collection Data Sources Data were obtained from the U.S. Census Bureau, Bureau of Economic Analysis, and Secretaries of State, The National Main Street Center, International Downtown Association, FBI Crime Statistics, Government Finance Officers Association (GFOA) and the International City / County Management Association. Data instruments originate from official sources, are often used in large studies, and are accepted as valid. For instance, Knack (2002) applied census data to social capital and the quality of government while Damanpour and Schneider (2009) used ICMA data to study innovation adoption in public organizations. Levels of Measurement Care was taken to assure the greatest possible analysis of data. Interval data was employed in all but two measures. Whereas ordinal measures give only a rough idea of the relationship between cases with respect to a variable. Interval measures provide information on the distance between cases. 66 Dependent Variable The intent of this study is to determine if variables of social capital, government performance, and economic development efforts affect the economic wealth in a community. It is essential to examine legitimate economic wealth statistics. The level of per capita income and median household income will be examined for the year 2004 using data available from the U.S. Census Bureau. Per capita income and Median household income data is widely available, and commonly used as dollars and cents indicators of the well being of individuals in a community. Summary of Dependent Variable Table 3.1 ? Measures of Dependent Variables Variable Indicator Coding Source Economic Wealth (D) Level of Per Capita Income in 2004 Interval U.S. Census Bureau Economic Wealth (D) Level of Median Household Income in 2004 Interval U.S. Census Bureau Independent and Intervening Variables Social capital is the independent variable in this study, and includes associational density, civic engagement, and community involvement as its component parts. The intervening variables for this study are municipal government performance, and economic development efforts. Social Capital Variables The social capital variables include measures of associational density. By looking at both associations promoting trust and cooperation (Putnam groups), and rent-seeking organizations with a financial incentive to form and join (Olson groups) we can better understand the level of trust and cooperation within cities. U.S. Postal Service listing of 67 zip codes will be used to find all zip codes for each city studied. The number of organizations per zip code and population in each zip code will be obtained from U.S. Census Bureau. The total number of organizations per zip code will be added as well as the population of each zip code to determine the total number of organizations within each city. This methodology of determining how many organizations are within each city has some drawbacks as zip codes and city boundaries do not necessarily coincide. However, the use of the zip code method does provide all organizations with addresses attached to each city's name. Utilizing zip codes is the most accurate data available. Civic engagement is measured to determine how involved the citizenry is in the political system. Voter participation is used as a proxy for civic engagement. A widely accepted measure of voter participation is the percentage of voters who voted in presidential elections. The voter turnout for presidential elections information is only available on the County level through State Secretary?s of State. However, voter turnout in presidential elections is the best measure readily available to measure civic engagement on the local level. The community involvement variable assists the research in gaining a better understanding of participation in Grisham?s criteria for successful cities. One measure determines if a city is a member of either a Main Street program or if it has a membership in the International Downtown Association (IDA). Downtown areas are the core of almost all cities; a source of pride for the citizens; and have almost universally been in a state of decline throughout the last half century. Both the National Main Street program and the International Downtown Association advocate for cities to improve their downtown areas through citizen participation. The organizations are very well 68 established, and are the primary vehicles for communities to come together. A community?s participation in Main Street or IDA serves as an excellent indicator of community involvement. Nevertheless, it is possible for a community to be very involved in the improvement of the city without belonging to either Main Street or IDA. Another measure of community involvement germane to this study is available in the 2004 ICMA Economic Development Survey. The survey asks, ?Which of the following participate in developing your local community?s economic development strategies?? Choices include city, county, state government, federal government, chamber of commerce, economic development corporation, regional organizations, planning consortia, public/private partnerships, private business/industry, and private/community economic development organizations. This can be measured for its breadth by counting the number of organizations, but also provides additional opportunities for analysis by examining what type of entities are included in creating development strategies. Table 3.2 presents the variables, indicators, coding, and data sources for the independent variable measures. Measures for Independent Variables Table 3.2 Measures of Independent Variables Variable Indicators Coding Predicted +/- Source Associations promoting trust and cooperation Putnam Groups Combined number of organizations per 10,000 people at the city level Interval Positive U.S. Census Bureau Rent-seeking groups with a financial incentive to Combined number of organizations per 10,000 people at the city level Interval Positive U.S. Census Bureau 69 form and join. Olson Groups Civic Engagement Percentage of voters in county who voted in 2004 presidential election Interval Positive www.fec.gov Community Involvement Does the city belong to the National Main Street program? Yes = 1; No = 0 Positive National Main Street Program Website Community Involvement Does the city have memberships in International Downtown Association? Yes = 1; No = 0 Positive IDA website Community Involvement Which of the following participate in developing your local community?s economic development strategies? ? City ? County ? State government ? Federal government ? Chamber of Commerce ? Economic development corporation ? Regional organizations ? Planning consortia ? Public/private partnership ? Private business/industry ? Private or community economic development foundation ? Utility ? College/university ? Citizen advisory board commission ? Ad hoc citizen group Interval (0-15) Positive ICMA 2004 Economic Development Survey Intervening Variables The municipal government performance variable provides insight into whether or not municipal governments are attempting to determine whether their policies are effective and or efficient. Government entities find it important to carry out performance measures as they do not benefit from the profit motive. Of particular interest is to 70 determine whether or not citizen participation in the community has an overall effect on municipal government performance, and whether in turn this affects the types of economic development programs or strategies pursued, and economic wealth. Measures for municipal government performance come from the ICMA. First, the 2004 ICMA Economic Development Survey will be utilized. This survey asks: ?Does your local government use performance measures to assess the effectiveness on its economic development efforts? If yes, which of the following performance measures are used? Input measures, output measures, and efficiency measures. Economic development effort provides an intriguing variable for the study. By including the efforts of government in using development tools, insight is gained into how the community and government performance affects the vigor and creativity of development professionals, and whether or not the use of these tools lead to increased economic wealth within the community. The 2004 ICMA Economic Development Survey also asks: ?Does your local government support any of the following programs to support economic development? Responses include: Community Development Corporation, Community Development Loan Fund, Environmental Sustainability, Efficient transportation systems, High quality physical infrastructure, Job training, Affordable quality child-care, Affordable housing, and other high quality of life (good education, recreation, and arts/cultural programs). This survey question can be measured by counting the number of inclusive programs or tools. This survey question provides additional opportunities for analysis by examining what type of tools are included in development efforts. It also is used to determine which tools were used in cities with the greatest wealth. Another useful measure is available from the 2004 ICMA Economic 71 Development Survey which asks the following series of questions: ?Does your government have a written small business development plan? Does your government have a written business retention plan? Does your government have a written business attraction plan? Does your local government offer business incentives? The previous questions allow us to peer further into the question of whether social capital and government performance affects the tools used by development professionals, and whether these tools affect economic wealth. In addition to the previous survey questions, a measure will include communities awarded the Government Finance Officers Association (GFOA) Budget awards for 2001, 2002, 2003, and 2004. Table 3.3 provides information regarding the variables, indicators, coding, and data sources for the intervening variables. Measures for Intervening Variables Table 3.3 Measures of Intervening Variables Variable Indicators Coding Source Government Performance ICMA survey question on performance measure usage Interval (0-4) 2004 ICMA Economic Development Survey* Government Performance Did the community receive a GFOA budget award in 2001, 2002, 2003, and 2004? Yes = 1; No = 0 GFOA website Economic Development Effort (I) Does your local government support any of the following programs to support economic development? ? Community Development Corp. ? Community Development Loan Fund ? Environmental Sustainability ? Efficient Interval (0-10) 2004 ICMA Economic Development Survey* 72 transportation systems ? High quality physical infrastructure ? Job training ? Affordable quality child-care ? Affordable housing ? Other high quality of life (good education, recreation, and arts/cultural programs Economic Development Effort (I) Does your government have a written small business development plan? Does your government have a written business retention plan? Does your government have a written business attraction plan? Does your local government offer business incentives? Interval (0-4) 2004 ICMA Economic Development Survey* Economic Development Effort (I) Please indicate which of the following incentives your local government offers? (Check all applicable) ? Tax abatement ? Tax credits ? Tax increment financing ? Locally designed enterprise zones ? Federal / State designated enterprise zones ? Special assessment districts ? Free land or land write downs ? Infrastructure improvements ? Subsidized buildings ? Low-cost loans ? Grants ? Zoning/permit Interval (0-19) 2004 ICMA Economic Development Survey* 73 assistance ? One stop permit assistance ? Utility rate reduction ? Regulatory flexibility ? Relocation assistance ? Employee screening ? Training support ? Other * Survey questions and demographic information for each city used within the 2004 ICMA Economic Development Survey may be found in Appendices A & B. Control Variables Control variables include property and violent crime, education attainment, transportation access, and form of government. By applying the control variables, we are able to validate a connection between the control variables and the dependent variables. Crime negatively effects economic wealth. Citizens in crime ridden communities tend to be more cautious, and less willing to meet with their neighbors. However, it may be easier for criminals to commit crimes in communities where people do not know their neighbors well. Further, high crime rates negatively effects governments as they must spend more of their budgets on law enforcement than other services. Prevalence of crime may also serve as a deterrent for economic wealth as workers and firms may be reluctant to locate to a city with high crime rates. Education plays a significant role in social capital, government performance, and economic wealth. Studies show education attainment is a key indicator of whether or not people participate in civic organizations. Educated citizens tend to have a greater knowledge and ability to provide solutions for the community. At the same time, more civic societies understand the value of providing educational opportunities for the entire 74 population. At the same time, better educated voters may make better decisions at the voting booth, which may improve government performance. Education is crucial to economic wealth and development. An educated work force is more attractive to potential employers, and attracts educated citizens. Education attainment is measured by the percentage of the population who has attained a high school education. Business firms strategically analyze transportation access when making locational decisions. Reality says no matter how much a community comes together to solve its problems, it may not be able to overcome barriers to development. However, as the economy becomes much more knowledge based, transportation becomes much less important. Council / Manager as a form of government is known to be more professional than other forms of local governments. Table 3.4 provides information regarding the variables, indicators, coding, predicted relationship, and data sources for the control variables. Measures for Control Variables Table 3.4 Measures of Control Variables Variable Indicators Coding Source Crime (C) Violent Crimes Per Year Interval FBI Crime Statistics Crime (C) Property Crimes Per Year Interval FBI Crime Statistics Education Attainment (C) Percentage of Population with high school diploma Interval U.S. Census Bureau Transportation Access (C) Which of the following is in your jurisdiction? ? Railroad ? Airport ? Port ? Truck route Interval (0-6) 2004 ICMA Economic Development Survey* 75 ? Major waterway ? Major highway Form of Government Data provided in ICMA dataset Nominal 2004 ICMA Economic Development Survey* * Survey questions and demographic information for each city used within the 2004 ICMA Economic Development Survey may be found in Appendices A & B. Statistical Analysis This study utilized a cross-sectional analysis technique, which allows for the study of phenomena in the same time period over a wide variety of cases. In this instance, the cases are cities across the United States. Numerous performance measures were drawn on to find the most useful models possible to predict economic wealth on the city level. Analyses were conducted systematically to determine the best variables to use in the study, and to eliminate less viable variables. Model schemes were utilized at times. For instance, one set of analysis was created to determine whether Putnam and Olson groups should be analyzed using raw scores with population or whether standardized scores would be more appropriate. Regression experiments including various control variables were employed to determine what best fit into the models. Finally, several different dependent variables were analyzed to see if additional knowledge concerning economic well being could be established utilizing this data. Appendix C provides a list of all measures considered for the models. Cross-Sectional Analysis Cross-sectional analysis has both benefits and limitations. In cross-sectional surveys, data are collected from respondents only once. With a representative sample, this design allows us to describe populations and relationships between variables in those populations at a given time. It does not allow us to say how the characteristics or 76 relationships have developed or will develop over time. Cross-sectional surveys offer a snapshot of a moving target. They are best suited to exploratory and descriptive studies, but together with a strong theory and proper data analysis, cross-sectional surveys can provide some basis for explanation (Manheim, et. al.; 2001). We recognize a limitation inherent in the cross-sectional nature of our research design. Ideally, research on changes in social capital would employ a longitudinal, interrupted time-series analysis, involving panel responses. In this ideal research design, data would be collected prior to institutional changes and, by interviewing the same subjects over time, researchers could isolate the specific effect of institutional changes. Unfortunately, few researchers had the foresight or the resources to conduct such a study; trade-offs must inevitably be made. For example, Putnam (1993) used aggregate level and (some would say) problematic measures of social capital (see Jackman and Miller 1996a) and went beyond his data to explore historical differences in the development of Italian regions. Regression Analysis Regression is the principle statistical technique used to model the relationship among variables at the interval level of measurement. Most measures in this study are interval measures (Clark, 2007, Chapter 12). This brings us to the most important set of results in regression, which measures the strength of the association of relationship between the two variables. Two measures of strength are commonly reported in regression analysis. The first is the correlation coefficient, Pearson?s r, and the second is the statistical significance of the relationship. 77 A correlation coefficient, such as Pearson?s r, provides a standardized measure of how strongly two variables are related. It varies between 0 when there is no association at all to either plus or minus 1 when there is a perfect relationship. Technically, a perfect relationship occurs when the values of the dependent variable can be exactly predicted from the values of the independent variable, or in graphical terms, when all the data points fall precisely on the regression line. Note the positive or negative sign of the correlation denotes the direction of the relationship, not the strength of the association. For example, an r of -.65 is much stronger than one of .35. The other measure of strength is the statistical significance of r and b, which is the same for both. Significance is the probability the observed relationship between two variables in a scatter-plot reflects ?random chance? rather than actual association. When the probability is low, conventionally 5% or less, the relationship is said to be statistically significant. Significance is calculated from ?test statistics,? such as F or t, which have known distributions. The test statistics can be used to calculate the probability of an F or t of a given size. The size of the statistics and, hence, the significance of a relationship is based on two factors. First, the higher the correlation between two variables, and the more likely it is to be statistically significant. Secondly, a larger number of cases in the analysis, equates to greater confidence, and consequently provides a more significant correlation. Multiple Regressions Multiple regressions are an extension of simple regression using two or more independent variables in a linear equation to predict the dependent variable (this section is based on Clark, 2007, Chapter 13). The linear equation for multiple regressions is 78 represented as a + ? . As with simple regression, in multiple regressions the assumption is made for all the variables can be measured as either ratio or interval scales. In this equation, a reflects the value of Y when all the x values for the independent variables in the linear equation are zero. As in simple regression, the statistical significance of Multiple R is measured by an F statistic. In simple regression, there was only one measure of statistical significance for both r and b. In multiple regressions, in contrast, the value of b measures the separate effects of the independent variables and Multiple R measures their combined impact. Thus, each b needs its own measure of significance. Here, they are provided by the test statistic t. Statisticians have developed a statistic referred to as beta, or the ?Standardized Regression Coefficient.? The beta is the coefficient if all the variables had the same units of measurement. The larger beta is, therefore, the greater the relative impact of an independent variable. Path Analysis Path analysis is a statistical technique by which we can evaluate the accuracy of such models by empirically testing the direct and indirect effects of one variable on another. It has been widely used in the social sciences because it is applicable to a great many research questions and has the advantage of allowing us to test large pieces of a theory at once rather than one hypothesis at a time. (Manheim, et. al. 2002). Multicollinearity Multicollinearity is a situation in which one or more independent variables are strongly correlated with another independent variable. Few social science variables are 79 perfectly predicted from knowledge of another set of variables. However, many important variables do tend to be highly correlated with each other. Relationships such as urbanization and industrialization, or education and income tend to be very highly correlated. Multicollinearity is a concern because if the correlations among the independent variables are high enough, the estimations of the coefficients become inaccurate and we cannot place any confidence in the results of the regression analysis. Significant multicollinearity can cause large variances in the partial regression coefficients, and becomes impossible to compare to the relative effects of different independent variables on the dependent variables. Plus, coefficients may fail to attain statistical significance even where there is a substantial relationship, which would lead us to falsely identify bivariate relationships as being spurious (appearance of two variables have a causal connection when they in fact have no relationship). (Manheim, et. al. 2002) Endogeneity When conducting analysis in the social sciences, it can be difficult to ascertain the true path of causality among variables. Problems with endogeneity (a loop of casuality between independent and dependent variables) often arise. The author acknowledges the potential for endogenity, but makes the case for the path model used. Time, resources, and data limitations did not allow for the study of endogeneity. Future research will include the study of lag variables to alleviate this possibility. Conclusion This chapter provided a detailed overview of the methods used in this study of social capital, government performance, economic development efforts, and economic wealth. The aim of this chapter was to connect the data with the method of analysis in 80 Chapter 4. In order for the data to have any meaning after it is collected, it must be properly analyzed using the correct method. This information is important because it aids in the interpreting of statistical figures about the relationship of the independent variables against the dependent variable in this cross-sectional study. 81 CHAPTER 4 RESEARCH RESULTS Introduction This chapter focuses on the presentation of statistical data to determine whether community organizations and / or local government performance measures can predict economic wealth on the city level. Alternate forms of independent variables were explored to determine if they offered a truer measurement of the concepts or better fit in the model. A variety of potential dependent variables were explored to determine which variable had both the best fit and was consistent with the existing literature. Statistical results for the model chosen are contained within the chapter. Alternate regressions were place in appendices. This chapter provides an overall test of the theoretical models described in chapters one and three while also better defining the best components to be placed in the model. Descriptive Statistics A statistical analysis begins with basic statistical techniques such as determining the frequency of occurrence of particular responses. It is also helpful to know information such as the mean or average score for particular variables. The following tables provide information about the variables used in this study. Community Variables One of the most common ways individuals participate in the direct improvement of their community is by improving business districts through a local Main Street program. Table 4.1 presents the number and percentage of cities within this study 82 having an active Main Street Program. Twenty-two percent of cities studied have Main Street programs. This information was found by visiting the National Main Street website and determining whether each of the cities listed a Main Street Program. Table 4.1 Frequency of Main Street Membership Frequency Valid Percent Valid No Program 491 77.9 Program 139 22.1 N 630 100.0 SOURCE: www.mainstreet.org Table 4.1 indicates the number of cities employing the Main Street Program in its economic development strategy. Larger cities tend to choose programs advocated for by the International Downtown Association that promotes individual participation in the direct improvement of their community. Table 4.2 presents the number and percentage of cities within this study having an active membership in the International Downtown Association. 6.7 percent of cities studied have membership in the International Downtown Association. This information was provided with paid membership in the International Downtown Association. Table 4.2 Frequency of Membership In International Downtown Association (IDA) Frequency Valid Percent Valid Not a Member IDA Member 588 93.3 1.00 42 6.7 N 630 100.0 SOURCE: www.ida.org 83 Table 4.2 indicates the number of cities with a membership in the International Downtown Association. This is an indicator of city staffs utilizing recommended IDA strategies. Another measure of community involvement germane to this study is available in the 2004 ICMA Economic Development Survey. The survey asks, ?Which of the following participate in developing your local community?s economic development strategies?? Choices include city, county, state government, federal government, chamber of commerce, economic development corporation, regional organizations, planning consortia, public/private partnerships, private business/industry, and private/community economic development organizations. Table 4.3 provides the frequency and percentage of the number of types of organizations involved in economic development within each city. Sixty cities involved three different types of organizations in its economic development representing 9.5 percent of the cities surveyed. Seventy-five cities gave the most typical response by indicating five types of organizations were involved in the economic development process. A preponderance of cities indicated between two and six organizations were involved in the development process. Less than 10% of all cities surveyed involved more than ten types of organizations. 84 Table 4.3 Frequency of Number of Types of Organizations Involved in Economic Development Decisions Frequency Valid Percent Valid 0 102 16.4 1 29 4.7 2 57 9.1 3 60 9.6 4 61 9.8 5 75 12.0 6 60 9.6 7 46 7.4 8 43 6.9 9 26 4.2 10 24 3.9 11 17 2.7 12 10 1.6 13 7 1.1 14 6 1.0 N 623 100.0 Source: ICMA 2004 Economic Development Survey Community involvement can also be measured by looking at the number of organizations in which people congregate with each other. These measures are known as ?associational density? measures and can be divided into two different type groups -- Putnam style and Olson style groups. Putnam groups include religious organizations, civic organizations, golf and country clubs, fitness centers, and bowling alleys. Putnam popularized the idea that people who came together socially were more likely to work together in improving their communities. Figure 4.1 indicates Putnam style groups have a mean (average) number of groups per 10,000 people in each city of 14.8394. 85 Figure 4.1 Histogram of the Number of Putnam Style Groups per 10,000 people. Figure 4.1 provides an illustration of the frequency of Putnam groups within cities standardized by population. Note most cities had less than 20 civic organizations per 10,000 people. An alternative measure of the associational density of civic participation can be labeled as Olson style groups. These groups are considered ?rent seeking? as their purpose is to provide an advantage to its membership in some material way. Olson groups include professional associations and trade unions. Source: http:// censtats.census.gov 86 Figure 4.2 Histogram of the Number of Olson Style Groups per 10,000 people. Source: www.censtats.census.gov Figure 4.2 shows the number of Olson (professional) organizations in cities per 10,000 people. Cities generally have far fewer Olson groups than Putnam groups. The mean (average) number of Olson groups is 2.50 organizations per 10,000. Civic engagement refers to people and organizations working to make improvements in a community through political processes. An example of civic engagement is voter registration. Community involvement shows individuals and organizations involved in local economic development. Civic engagement is measured to determine how involved the citizenry is in the political system. Voter participation is used as a proxy for civic engagement. A widely accepted measure of voter participation is the percentage of voters who voted in presidential elections. This information is only available on the County level through 40.00 20.00 0.00 250 200 150 100 50 0 Mean =2.5049 Std. Dev. =2.83454 N =630 Frequency 87 each state?s Secretaries of State office. However, it is the best readily available measure of civic engagement on the local level. Figure 4.3 displays the percentage of people who voted in the 2004 Presidential General Election. Voter turnout averaged 71.34% for the cities within the sample and generally had a normal distribution. Figure 4.3 ? Histogram of the Percentage of Registered Voters who Voted in the 2004 General Election for president The majority of cities had voter turnout in a range between 65-85%. Intervening Variables The intervening variables include data measuring both government performance and economic development efforts within cities. Cities commended by the Government Finance Officers Association (GFOA) for submitting excellent budgets as well as responses for ICMA survey data concerning the extent a city uses performance standards in its business recruitment measured government performance. Data regarding the number of economic development programs, number of types of strategic plans, and number of types of tax incentives utilized by each city were used to measure economic Source: www.fec.gov 88 development effort. The following figures and tables illustrate the frequency and percentage of responses from each measure. Cities commended by the Government Finance Officers Association (GFOA) for submitting excellent budgets in any of the years from 2001 to 2004 were coded as having received an award for its government budgets. 34.3 percent of surveyed cities were given awards for excellent budgets in the years 2001-2004. 65.7 percent of the cities did not receive budgeting awards in the 2001-2004 timeframe. Table 4.4 ? Frequency of Cities Awarded GFOA Budget Awards (2001-2004) Frequency Valid Percent Valid Not Awarded 414 65.7 Awarded 216 34.3 N 630 100.0 Source: www.gfoa.org The performance standards measure provides insight into whether or not municipal governments are attempting to determine whether their policies are effective and or efficient. It is particularly important for government entities to carry out performance measures as they do not benefit from the profit motive. It is particularly interesting to determine whether or not citizen participation in the community has an overall effect on municipal government performance, and whether in turn this affects the types of economic development programs or strategies pursued, and economic wealth. Measures for municipal government performance come from the ICMA. The 2004 ICMA Economic Development Survey will be utilized. This survey asks: ?Does your local government use performance measures to assess the effectiveness on its economic development efforts? If yes, which of the following performance measures are used? 89 Input measures, output measures, and efficiency measures. An example of input measures would be the number of staff hours expended by a program. An example of an output measure would be the number of organizations receiving assistance. For efficiency measures, program expenditures per tax dollars generated would be a good example. Figure 4.4 Frequency of the Number of Performance Standards Utilized in Economic Development within Cities Source: 2004 ICMA Economic Development Survey Figure 4.4 shows the number of types of performance standards each city employed in its economic development strategies. Note the first column consist of both 0 and ?no answer? responses. Economic development effort provides an intriguing variable for the study. By including the efforts of government in using development tools, insight is gained into how the community and government performance affects the vigor and creativity of 90 development professionals, and whether or not the use of development effort tools lead to increased economic wealth within the community. A useful measure is available from the 2004 ICMA Economic Development Survey which asks the following series of questions: ?Does your government have a written small business development plan? Does your government have a written business retention plan? Does your government have a written business attraction plan? Figure 4.5 - Histogram of the Number of Types of Strategic Plans used in Economic Development Source: 2004 ICMA Economic Development Survey The 2004 ICMA Economic Development Survey also asks: ?Does your local government support any of the following programs to support economic development? Responses include: Community Development Corporation, Community Development 6.00 4.00 2.00 0.00 200 150 100 50 0 Mean =1.8937 Std. Dev. =1.35325 N =630 STRATEGIC PLANS Frequency 91 Loan Fund, Environmental Sustainability, Efficient transportation systems, High quality physical infrastructure, Job training, Affordable quality child-care, Affordable housing, and other high quality of life (good education, recreation, and arts/cultural programs). This survey question can be measured by counting the number of inclusive programs or tools. It also is used to determine which tools were used in cities with the greatest wealth. Figure 4.6 Histogram of the Number of Types of Programs used in Economic Development Source: 2004 ICMA Economic Development Survey Figure 4.6 indicates the number of economic development programs utilized by each city. Please note according to this graph, answers of 0 and ?no answer? appear the same. 92 Correlations. One of the most common statistical techniques is the measure of association between two interval variables. By conducting correlations we can better understand the relationships between variables. This is a preliminary step performed to determine if two variables are similar and have a connection. For instance, we may have a hunch poorly educated individuals are more likely to commit crimes. Correlations allow us to conduct an analysis to see if whether on the surface there is a connection between the two and whether or not there is a positive or negative relationship. The research question is this dissertation asserts cities with many community organizations tend to have more prosperous citizens. This analysis allows us to look at many types of community organizations to determine which if any are related to a city?s economic wealth. By correlating different types of organizations we are able to see if there are relationships between them. This dissertation will discuss correlations between community variables, between government performance variables, and economic development effort variables. Correlations between control variables are listed in appendix E. Community Variables The community variables for this study include the number of civic organizations per 10,000 people within a city (Standard Putnam Groups). It includes the study of the number of professional organizations per 10,000 people (Standard Olson Groups). It concerns itself with whether the city has a Main Street Program or has a membership within the International Downtown Association (IDA). Other community variables 93 include the number of types of organizations involved in the economic development process within the city and the voter turnout in the 2004 presidential election. Table 4.5 provides correlations between each of the community variables used within the study. Note Putnam Standard and Olson Standard had a significantly high correlation of .632. Cities with a higher percentage of civic organizations in the population were more likely to have more professional organizations as well. This correlation was also significant at the .01 level. Other relationships were significant as well with lower correlations. Cities with Main Street programs have a positive correlation of .203 with Putnam standard groups and were significant at the .01 level. Main Street programs had a negative correlation of -.119 with voter turnout and were significant at the .01 level. Table 4.5 ? Correlations between Community (Social Capital) Variables STANDARD PUTNAM GROUPS STANDARD OLSON GROUPS MAIN STREET PROGRAM INTERNATIONAL DOWNTOWN ASSOCIATION MEMBERSHIP VOTER TURNOUT NUMBER OF ORGANIZATIONS INVOLVED IN ECONOMIC DEVELOPMENT STANDARD PUTNAM GROUPS Pearson Correlation 1 .632(**) .203(**) .019 .014 .052 STANDARD OLSON GROUPS Pearson Correlation .632(**) 1 .062 .055 .061 .047 MAIN STREET PROGRAM Pearson Correlation .203(**) .062 1 .011 -.119(**) .054 INTERNATIONAL DOWNTOWN ASSOCIATION MEMBERSHIP Pearson Correlation .019 .055 .011 1 -.094(*) .183(**) VOTER TURNOUT Pearson Correlation .014 .061 -.119(**) -.094(*) 1 -.056 NUMBER OF ORGANIZATIONS INVOLVED IN ECONOMIC DEVELOPMENT Pearson Correlation .052 .047 .054 .183(**) -.056 1 N 623 623 623 623 589 623 ** Correlation is significant at the 0.01 level (2-tailed). * Correlation is significant at the 0.05 level (2-tailed). 94 Intervening Variables The intervening variables include data measuring both government performance and economic development efforts within cities. Cities commended by the Government Finance Officers Association (GFOA) for submitting excellent budgets as well as responses for survey data concerning the extent a city uses performance standards in its business recruitment. Table 4.6 provides correlations between government performance measures and economic development measures. Economic development programs and tax incentives have a correlation of .537. This is consistent with the idea that cities utilize multiple tools in improving their economic outlook. The use of strategic planning techniques appears to be highly correlated with many government performance and economic development effort measures. Strategic plans are positively correlated to tax incentives and performance standards at the .01 level. The use of strategic planning and performance standards in tandem is quite plausible as both are professional techniques taught in public and business administration. Table 4.6 ? Intervening Measures Correlations ECONOMIC DEVELOPMENT PROGRAMS STRATETIC PLANS PERFORMANCE STANDARDS GFOA AWARDS TAX INCENTIVES ECONOMIC DEVELOPME NT PROGRAMS Pearson Correlation 1 .290(**) .199(**) -.019 .537(**) STRATEGIC PLANS Pearson Correlation .290(**) 1 .244(**) .099(*) .364(**) PERFORMAN CE STANDARDS Pearson Correlation .199(**) .244(**) 1 .187(**) .314(**) GFOA AWARDS Pearson Correlation -.019 .099(*) .187(**) 1 .146(**) TAX INCENTIVES Pearson Correlation .537(**) .364(**) .314(**) .146(**) 1 N 626 630 469 630 630 ** Correlation is significant at the 0.01 level (2-tailed). * Correlation is significant at the 0.05 level (2-tailed). 95 Comparing Independent Variables It is essential to know which of several independent variables exerts the most influence on a dependent variable. This study concerns itself in understanding the relationships between participation in the community, the performance of government, economic development efforts within the city, and its effects on economic wealth. By understanding these relationships we may better understand how we as citizens may positively influence the prosperity of our community and inversely how the government may set policies promoting both cohesion and prosperity within the community. This analysis is novel in that previous studies have not used a model to measure these relationships on such a vast scale on the city level. The following sections will provide analysis of the relationships between the independent and intervening variables. Community Effect on Government Performance In multiple regressions, measures are looked at in a linear sort of way. In this multiple regression, community involvement comes before government performance. Figure 4.7 -- Model Illustrating Path from Community Involvement to Government Performance Government Performance Community Involvement Table 4.7 on page 99 shows the un-standardized Beta coefficient and standard error for multiple regressions with community and control variables serving as independent measures and the GFOA Award measure and Performance Standards measure serving as dependent variables. This allows us to understand how the community level variables 96 interact with government performance. Cities who were honored with the GFOA Award for excellent budgeting in any of the years 2000-2004 were coded with a 1 while cities who had not obtained the award was given a value of 0. The Performance Standards Measure is a response to question 33 on the 2004 ICMA Economic Development Survey. This question asks ?Does your local government use performance measures to assess the effectiveness of its economic development efforts?? and if ?yes,? which of the following performance measures are used (check all applicable.) 1.) Input Measures, 2.) Output Measures 3.) Efficiency Measures, or 4) other. Positive responses were then added. Cities scores could range from 0 to 4, with zero being for the city used no performance measures at all, and 4 being one in which the city responded yes, they do use performance measures, and then checked all 4 boxes as well. This question relies on human responses to a questionnaire. In the GFOA budget award regression analysis, voter turnout had a negative relationship and was significant at the .01 level. Hence, cities with lower voter turnout were more likely to have won the GFOA budget awards. Membership in the International Downtown Association was significant at the .05 level and indicates cities with membership in the IDA are more likely to win the GFOA award. These findings are consistent with the existing literature concerning community involvement and government performance. The positive connection between IDA and GFOA can be explained due to the tendency of larger cities to have IDA memberships and a higher degree of professionalism by the city employees. The connection may exist because IDA also promotes a high degree of professionalism and education in providing guidance to its membership. The strong negative relationship between winning GFOA awards and lower 97 voter turnout is notable. One explanation could be larger cities are more likely to submit more professional budgets and have a very professional formal budget process. The same cities would also tend to have lower voter turnout. Putnam and Olson groups as well as Main Street programs were not found to be significant to winning GFOA awards. This indicates the number of civic or professional groups within a city as well as the existence of an organized group implementation of preservation and revitalization may not influence whether or not the local government provides detailed, professional budgets. This also shows that community organizations are not a determining factor in whether a city has overall good governance. The notion that the number of types of organizations involved in creating economic development within the city does not show a significant relationship with whether or not a city won budget awards. Even if many organizations have a seat at the table during the decision making process, it may not result in good government, or at least not result in city governments winning budget awards. The existence of performance standards may serve as an excellent indicator of good government. Regressions point to a significant positive relationship between both membership in the International Downtown Association and the number of types of organizations involved in economic development. Both relationships were significant at the .01 level. Membership in the IDA may be connected to whether performance standards are used in economic development. The relationship may be due to an emphasis on professionalism within the IDA membership or the tendency for membership in larger cities. Findings suggest cities which include more types of organizations in the economic development process also create more performance standards measures. These findings suggest as committees come together they are more likely to create measures of success. 98 Cities willing to bring in many organizations to provide input on economic development projects may do so for a variety of reasons. The city may bring in many factions to reduce conflict within the city, or may be a function of the city very open to the ideas and contributions of many individuals, and is the natural way for the city to accomplish goals. It could also be a function of city leadership, which is not a focus of this dissertation. For a more in-depth discussion of city dynamics see Dahl 1961. Grisham (1999) provides an excellent case study of how citizen participation can evolve through leadership to lead to positive changes in economic development on the city level. Comparisons of the regression results with independent community variables and dependent government performance measures indicate both similarities and differences. Neither GFOA nor Performance Standards indicated a significant relationship to Putnam or Olson groups, nor to Main Street Programs. Cities who had won GFOA budget awards were less likely to have a high voter turnout. Cities with a high number of types of organizations involved in the economic development process were more likely to use performance standards in evaluating their success or failure in obtaining goals. Education and crime were significant factors for both government performance measures. Cities with council manager forms of government were more likely to have won GFOA budget awards. The adjusted R-square for both models was weak, indicating a need for further refinement of the models. Table 4.7 ? Regression Results: Government Performance as Dependent Variable Variable GFOA Awards Adj. R-Square = .105 Performance Standards Adj. R-Square = .095 Un-standardized Beta coefficient Un-standardized Beta coefficient Standard Error Standard Error Community Putnam Standard -.003 -.003 .003 .006 99 Olson Standard .001 .012 .012 .028 Main Street -.009 -.029 .052 .114 IDA .165** .486*** .084 .179 Voter Turnout -.659*** -.848 .237 .522 Number of Organizations involved in ED -.006 .047*** .006 .015 Control Council/Manager .227*** -.005 .051 .112 Transportation Access -.009 .034 .012 .026 High School Diploma 1.481*** 1.365** .277 .634 Violent Crime 7.20E-005 .001*** .000 .000 Property Crime 2.51E-005* -5.2E-006 .000 .000 ***Regression is significant at the 0.01 level. ** Regression is significant at the 0.05 level. * Regression is significant at the 0.10 level. The above table was provided to give the reader greater insight into the relationships community measures have with measures for government performance. Note that IDA was significantly related to both GFOA and Performance Standards. Voter Turnout was negatively related to GFOA budget awards. The number of types of organizations was positively related to the use of performance standards. In the previous figures, population was standardized but not used as a control variable itself. Regressions using raw scores for both Putnam and Olson groups can be found in Appendix F. The regressions were almost identical to the findings in Table 4.7 and did not appear to add to the discussion. Community and Government Performance Effect on Economic Development Effort In multiple regressions, measures are looked at in a linear sort of way. In this multiple regression, community involvement comes before government performance and 100 government performance comes before economic development effort. This can be seen as: Figure 4.8 -- Model Illustrating Paths of Independent and Intervening Variables Government Performance Community Involvement Economic Development Effort Table 4.8 provides the un-standardized beta coefficients, standard error, and significance of community involvement and government performance measures serving as independent variables with the dependent variables of economic development efforts. Dependent variables include the number of programs used for economic development, the number of types of strategic plans utilized, and the number of different types of tax incentives employed by the city governments. The programs measure used was obtained from the 2004 ICMA Economic Development Survey. Question 14 on the survey asked, ?Does your local government support any of the following programs?? Choices included: Community Development Corporation, Community Development Loan Funds, Microenterprise Programs, Job Training, Childcare, or other. This table shows the number of types of organizations involved in economic development was significant at the .01 level. Putnam groups have a negative relationship and were significant at the .05 level, while Olson standard was significant at the .1 level. The number of types of organizations involved in economic development shows the breadth of organizations invited to the table in making economic development decisions. As more organizations become involved in the economic development decision making process, more programs designed to improve economic 101 development will emerge from the process. As more organizations become involved in the process, more manpower may become available to pursue programs. Federal funding programs often require funded projects to have many different stakeholders who provide either direct or in-kind funds for the project. As an individual or organization becomes involved in a planning process, they are more likely to participate in the projects coming out of the planning process. This regression analysis suggests a city is more willing to come together to create programs if there is good transportation access and a greater level of Olson type (rent-seeking) organizations operating within the city. The positive relationship between Olson type (rent-seeking) groups and the number of programs used for economic development suggest when there are more professional groups within the city there are more economic development programs implemented. Consider that labor unions and other professional organizations were included within the Olson groups and would have a vested interest in increased economic development within the city. Putnam groups have a statistically significant negative relationship to the number of programs used for economic development. This suggests cities with fewer Putnam groups per capita have more economic development programs. Economic development programs implemented in this study are programs specifically implemented by the cities such as creating community development corporations, and implementing loan funds and microenterprise programs. The implementation of such programs may be more necessary in cities with less civic cohesion because of a decreased quality of life, and a decreased willingness for volunteer groups such as a downtown association to provide similar services. 102 Table 4.8 also includes the regression analysis of community variables serving as independent variables and strategic plans serving as the dependent variables. The strategic plans measure was a composite of several questions asked in the 2004 ICMA Economic Development Survey concerning the existence of particular types of strategic plans being utilized by city governments. This analysis indicates the number of types of organizations involved in economic development and the performance standards were significant at the .01 level, while being awarded with a GFOA budget award was significant at the .05 level. The number of organizations, performance standards, and GFOA budget awards were all positively related. It appears the prevalence of strategic plans and the number of programs used in economic development would have operational similarities. A pattern emerges that suggests having more organizations involved in the economic development planning process influences the extent in which the city employs strategic planning techniques. By involving more groups, the city uses more professional planning techniques. It will be interesting to see if planning techniques increase economic wealth, as the anonymous saying goes, ?He who fails to plan, plans to fail.? The prevalence of performance standards and winning GFOA budget awards were also related to strategic planning. Reason would dictate professionally managed cities would employ performance standards, and would create effective budgets. Table 4.8 provides the un-standardized beta coefficient, standard error, and significance of the prevalence of incentives, which serves as one part of the economic development effort variable. Olson standard, number of organizations involved in economic development and GFOA awards was significant at the .01 level. Putnam 103 standard groups and performance standards were significant at the .05 level. Olson standard groups, number of organizations involved in economic development, performance standards, and GFOA were all positively related, while Putnam standard groups was negatively related. The significance of three community variables suggests community involvement indeed has a relationship with the extent a city employs tax incentives. As with strategic plans, cities with a proclivity to use tax incentives were also more likely to have positive government performance as performance standards and GFOA awards were positively related. 104 Table 4.8 ? Regression Results: Economic Development Efforts as Dependent Variable Variable Programs Adj. R-Square =.263 Strategic Plans Adj. R-Square =.141 Tax Incentives Adj. R-Square = .202 Un-standardized Beta coefficient Un-standardized Beta coefficient Un-standardized Beta coefficient Standard Error Standard Error Standard Error Community Putnam Standard -.017* -.012 -.033* .009 .008 .017 Olson Standard .078* .053 .285*** .041 .040 .081 Main Street -.013 -.011 -.039 .169 .163 .332 IDA .341 -.116 -.749 .273 .258 .526 Voter Turnout .160 .189 .520 .782 .751 1.528 Number of Organizations involved in Economic Development .168*** .063*** .243*** .023 .022 .045 Government Performance Performance Standards .218** .292*** .832*** .082 .078 .160 GFOA Awards -.126 .297** .699*** .149 .143 .292 Control Council /Manager -.008 .202 -.448 .169 .163 .332 Transportation Access ..059 .171*** .077 .040 .038 .077 H.S. Diploma -3.723*** -2.340** -5.033*** .971 .934 1.900 Violent Crime .000 .000 .000 .000 .000 .001 Property Crime -7.4E-005* -3.9E-005 -9.9E-005 .000 .000 .000 *** Regression is significant at the 0.01 level. ** Regression is significant at the 0.05 level. * Regression is significant at the 0.10 level. 105 Economic Wealth Our completed model for the relationships between community involvement, government performance, economic development effort, and economic wealth is shown below. This model (Figure 4.9) shows community affecting government performance, development efforts, and economic wealth. Government performance is shown effecting development efforts and wealth. Economic development efforts are shown as being effected by both community involvement and government performance, and in turn affect economic wealth. Figure 4.9 ? Complete Model Government Performance Community Involvement Economic wealth Economic Development Effort Table 4.9 indicates the similarities and differences in the data results for each of the regressions utilizing measures for economic development effort. Both Putnam and Olson groups were significant in predicting relationships with both programs and incentives. However, Olson groups were positively related while Putnam groups were negatively related. The number of the types of organizations involved in economic development and performance standards were positively related to all three of the economic development effort measure. GFOA budget awards were positively related to both strategic plans, and tax incentives. 106 This table provides the un-standardized beta coefficients, standard errors, and significance for each of the independent variables which include the community, government performance, and economic development effort variables, with all of the possible dependent variables. This study has concerned itself in determining the level of wealth within a city, the growth in wealth, and also the opinion of the economic development professionals who responded to the 2004 ICMA Economic Development Survey. Table 4.9 also provides an analysis of the adjusted for each regression analysis, which indicates just how well a particular model represents reality. Per capita income and median household income both provide excellent measures for the overall wealth in the community. Though similar, per capita income measures the average income per person, while median household income is the income at the median or the middle most observation, and is for the entire household. The growth of per capita income and median household income is the percentage change from 1999 to 2004 and is used to determine whether or not there was growth or decline in incomes over a five year period. The 2004 ICMA Economic Development Survey asked the local economic development professionals to estimate the growth of their cities over the past five years and over the next five years. This allowed the researcher to not only analyze the actual economic performance, but to also analyze the perceptions of economic development professionals in terms of economic performance. In conducting this analysis, Per Capita Income for 2004 had an adjusted of .428 and Median Household Income had an adjusted of .536. All other measures had an of less than .080. Because of this, we will discuss the un-standardized beta coefficients, standard error, and significance of regressions using per capita income and 107 median household income as dependent variables, and all control, community, government performance, and economic development effort variables as independent variables. Regressions concerning economic growth and opinion of economic growth are provided in appendix H. In the regression analysis with per capita income 2004 serving as the dependent variable, economic development programs were significant at the .01 level while IDA were significant at the .05 level. IDA was positively related to per capita income while economic development programs measure was negatively related to economic development. These findings are quite different from previous tables. Notably, IDA is significant while the number of organizations involved in economic development is not. There is a tendency for larger cities to have IDA membership, and population size may have made a difference to why IDA is significant for this analysis. In the regression analysis with median household income 2004 serving as the dependent variable, the number of economic development programs measure was significant at the .01 level while Putnam groups were significant at the .05 level. Both Putnam groups and economic development programs were negatively related to median household income. 108 Table 4.9 Best models for all Possible Dependent Variables Not Used Variable Per Capita Income Growth Adj. R-Square = .021 Median Household Income Growth Adj. R-Square = .076 Change in Total Income 1999-2004 Adj. R-Sq = .010 Economic Development Opinion Last 5 Years Adj. R-Square = .034 Economic Development Opinion Next 5 Years Adj. R-Square = .043 Un-standardized Beta coefficient Un- standardized Beta coefficient Un- standardized Beta coefficient Un-standardized Beta coefficient Un-standardized Beta coefficient Standard Error Standard Error Standard Error Standard Error Standard Error Community Putnam Standard .000 .000 .002 -.001 .007 .003 .001 .003 .009 .007 Olson Standard -.017 -.005 -.023* .072* .062** .013 .004 .014 .041 .031 Main Street -.101 -.018 -.089 -.092 -.215* .054 .015 .056 .165 .127 IDA -.074 .000 -.036 .338 .343* .088 .025 .091 .271 .205 Voter Turnout .339 .243*** .511** -.732 -.407 .246 .073 .259 .763 .582 Number of Organizations involved in ED -.002 -.002 -.004 -.022 -.005 .008 .002 .008 .025 .019 Government Performance Performance Standards -.012 .005 .013 -..106 -.114* .020 .008 .028 .083 .066 GFOA Awards .134*** -.002 .096* -.340** -.134 .049 .014 .050 .148 .114 Economic Development Efforts ED Programs .005 .001 .005 .073 -.030 .019 .005 .018 .053 .041 Strategic Plans .015 -.001 .013 .066 -.015 .019 .005 .018 .054 .041 Tax Incentives -.006 -.002 .000 .015 .012 .009 .003 .009 .028 .021 Control Council /Manager .003 .010 -.013 .011 -.057 .053 .016 .056 .165 .125 Transportation Access .004 -.002 -.006 .005 .056* .014 .004 .014 .040 .030 H.S. Diploma -.097 -.259*** -.356 -.630 -.362 .297 .092 .332 .968 .734 Violent Crime 8.66E-005 1.91E-005 -1.31E-005 .000 .000 .000 .000 .000 .000 .000 Property Crime -2.11E-005 -1.58E-005*** -1.40E-005 7.10E-005* -6.05E-006 .000 .000 .000 .000 .000 109 Table 4.10 below provides the multiple regression relationships between the dependent variables of per capita income and median household income and each of the independent and control variables. Tables detailing growth in per capita income and median household income, the opinions of economic development professionals concerning the level of growth in the past and next five years, as well as a the growth or decline for entire cities are provided in appendix F. 110 Table 4.10 ? Best Models for Median Household Income and Per Capita Income Serving as Dependent Variable Variable Per Capita Income 04 Adj. R-Square = .428 Median Household Income 04 Adj. R-Square =.536 Un-standardized Beta coefficient Un-standardized Beta coefficient Standard Error Standard Error Community Putnam Standard -48.344 -248.968** 59.206 115.709 Olson Standard -264.771 -941.186* 284.964 550.648 Main Street -956.153 -3902.277* 1143.858 2206.003 IDA 4704.749** 1181.594 1866.626 3567.536 Voter Turnout 5449.251 15810.343 5443.896 10699.917 Number of Organizations involved in ED -279.908 -261.387 170.869 335.714 Government Performance Performance Standards 232.179 1667.952 567.522 1088.060 GFOA Awards -347.604 1863.625 1008.091 1956.140 Economic Development Effort ED Programs -1204.870*** -3066.753*** 376.579 731.896 Strategic Plans 227.558 -426.919 377.888 728.022 Tax Incentives 169.296 294.314 193.570 375.438 Control Council /Manager 967.273 314.939 1170.028 2265.508 Transportation Access -597.217** -1470.990*** 278.403 537.784 H.S. Diploma 63784.820*** 95321.749*** 6818.235 13294.164 Violent Crime 2.309 -.649 1.909 3.749 Property Crime -.824*** -3.231*** .299 .583 *** Regression is significant at the 0.01 level. ** Regression is significant at the 0.05 level. * Regression is significant at the 0.10 level. 111 Table 4.11: Best Models for Per Capita Income Best Models for Per Capita Income Variable Adj. R- Square = .422 Adj. R- Square =.400 Adj. R- Square = .419 Adj. R- Square = .405 Adj. R- Square = .417 Adj. R-Square = .432 Adj. R- Square = .415 Adj. R- Square = .428 Community Putnam Standard 3.898 -35.776 -5.104 -48.344 50.932 59.112 50.923 59.206 Olson Standard -295.259 -290.581 -275.714 -264.771 235.548 282.213 235.640 284.964 Main Street -2107.48** -993.161 -2031.314** -956.153 986.519 1152.377 981.109 1143.858 IDA 3540.568** 3825.236** 4066.031** 4704.749** 1606.358 1837.081 1621.253 1866.626 Voter Turnout 4850.231 5948.029 4552.189 5449.251 4609.196 5463.062 4592.783 5443.896 Number of Organizations involved in ED -388.762*** -423.134*** -296.464** -279.908 118.571 156.161 142.485 170.869 Government Performance Performance Standards 3.010 217.901 344.335 232.179 527.486 537.550 565.319 567.522 GFOA Awards 286.627 -70.270 -18.343 -347.604 1001.142 999.955 1003.972 1008.091 Economic Development Efforts ED Programs -1230.144*** -1069.701*** -1282.535*** -1204.870*** 334.575 355.419 359.787 376.579 Strategic Plans 517.160 524.532 187.064 227.558 331.330 333.922 378.271 377.88 Tax Incentives 70.181 168.631 46.883 169.296 162.780 166.080 190.012 193.570 Control Council /Mgr 658.600 846.168 862.595 793.731 904.598 718.387 916.319 967.273 987.949 1173.754 972.176 976.712 1173.754 981.680 1167.983 1170.028 Transportation Access -349.738 -573.238** -340.919 -387.996* -617.173** -418.406* -509.618* -597.217** 230.495 272.372 249.728 225.653 271.303 248.989 279.468 278.403 H.S. Diploma 64785.714*** 71312.487*** 66444.121*** 68010.065*** 66342.444*** 63366.314*** 67379.934*** 63784.820*** 5298.469 6355.823 5072.194 5074.835 6644.633 5320.243 6500.762 6818.235 Violent Crime .368 2.538 1.266 .527 1.789 .784 3.073 2.309 1.626 1.877 1.604 1.600 1.911 1.625 1.870 1.909 Property Crime -.612* -.954*** -.801*** -.776*** -.763** -.654** -.966*** -.824*** .255 .292 .247 .249 .300 .255 .289 .299 *** Regression is significant at the 0.01 level. ** Regression is significant at the 0.05 level. * Regression is significant at the 0.10 level. Table 4.11 is a model expressing per capita income as the dependent variable to be examined. Each column represents combinations of the variables. Control variables are included in all regression models. The first column lists all possible variables regressed to per capita income. Every possible combination of groups of independent 112 and intervening variables is included in the models to determine which models have the greatest fit, and helped explain the model best. The last column in the table shows the regression analysis with all variables represented in the model. The Adjusted R-Square of .416 was the highest of any regression model using per capita income as the dependent variable. 113 Table 4.12: Best Models for Median Household Income Variable Adj. R- Square = .500 Adj. R- Square =.482 Adj. R- Square = .484 Adj. R- Square = .468 Adj. R- Square = .519 Adj. R- Square = .512 Adj. R- Square = .505 Adj. R- Square = .536 Community Putnam Standard -83.082 -200.110* -99.505 -248.968** 100.204 116.303 99.905 115.709 Olson Standard -1222.470*** -1117.987** -1198.558*** -941.186* 460.699 549.545 459.355 550.648 Main Street -5905.589*** -3919.391* -5821.496*** -3902.277* 1925.405 2242.269 1906.673 2206.003 IDA 485.091 457.305 1051.893 1181.594 3109.000 3544.684 3123.667 3567.536 Voter Turnout 8797.101 13822.507 9533.044 15810.343 9127.170 10825.067 9057.430 10699.917 Number of Organizations involved in ED -611.275*** -765.590** -363.023 -261.387 233.492 306.993 280.748 335.714 Government Performance Performance Standards 439.323 1089.998 1661.857 1667.952 1044.345 1039.550 1108.121 1088.060 GFOA Awards 2865.658 2267.917 2128.351 1863.625*** 2002.163 1959.749 1984.205 1956.140 Economic Development Effort ED Programs -2911.384*** -2664.282*** -3168.055*** -3066.753*** 661.736 695.081 708.844 731.896 Strategic Plans 637.361 534.187 -298.716 -426.919 653.890 648.147 743.533 728.022 Tax Incentives 470.917 644.536** 71.622 294.314 323.722 324.357 376.556 375.438 Control Council /Mgr 217.507 444.420 337.409 1550.431 -19.623 383.087 779.184 314.939 1937.284 2345.728 1470.520 1944.521 2291.998 1917.968 2308.435 2265.508 Transportation Access -1334.275*** -1574.185*** -841.416** -1339.475*** -1721.467*** -1331.559*** -1259.711** -1470.990*** 450.832 542.573 384.252 448.819 528.240 485.892 550.985 537.784 H.S. Diploma 109164.42*** 113652.54*** 91023.621*** 111485.32*** 105792.23*** 104838.74*** 101320.18*** 95321.749*** 10419.775 12768.710 7805.776 10139.383 13067.779 10416.743 12907.474 13294.164 Violent Crime -2.361 -1.565 -2.623 -3.372 -1.566 -1.210 -.742 -.649 3.209 3.783 2.468 3.200 3.783 3.190 3.729 3.749 Property Crime -2.639*** -3.868*** -2.350*** -3.336*** -3.077*** -2.741*** -3.885*** -3.231*** .504 .590 .380 .499 .591 .501 .577 .583 *** Regression is significant at the 0.01 level. ** Regression is significant at the 0.05 level. * Regression is significant at the 0.10 level. Table 4.12 is a model expressing median household income as the dependent variable to be examined. Each column represents combinations of the variables. Control 114 variables are included in all regression models. The first column lists all possible variables regressed to median household income. Every possible combination of groups of independent and intervening variables is included in the models to determine which models had the greatest fit, and helped explain the model best. The last column in the table shows the regression analysis with all variables represented in the model. The Adjusted R-Square of .549 was the highest of any regression model. Path Analysis It is often important to know which of several independent variables exerts the most influence on a dependent variable (Manheim, 2002). For instance, this dissertation examines whether community involvement influences city government performance, economic development efforts, or economic wealth. At the same time, it examines whether there is a relationship between city government performance and the city?s economic development efforts, and / or its economic wealth. If we were concerned with finding cost efficient and equitable ways to improve the economic wealth within a city, or to improve the competitiveness of American cities in general, this analysis would provide evidence about what factors have the most impact for further development. When independent variables are measured in different units, regression coefficients do not reflect the relative influence on independent variables on the dependent variables. This problem can be avoided by standardizing the variables into standardized partial regression coefficients. Regression analysis can be quite useful in testing specific hypotheses and assessing the relative impacts of different independent variables. Regression, however, assumes a model of causation which does not always reflect the complexities of the real world (Manheim, et. al. 2002). 115 Path analysis is a statistical technique by which we can evaluate the accuracy of such models by empirically testing the direct and indirect effects of one variable on another. It has been widely used in the social sciences because it is applicable to a great many research questions and has the advantage of allowing us to test large pieces of a theory at once rather than one hypothesis at a time. (Manheim, et. al. 2002). Path analysis begins with a conceptual model specifying the causal relationships the researcher thinks are at work. The model says community involvement influences government performance, government performance influences economic development efforts, and economic development efforts influences economic wealth we are essentially building a model like: Figure 4.10 Government Performance Community Involvement Economic Wealth Economic Development Effort Table 4.13 below provides the standardized beta coefficients and its significance of each of the direct paths. The column headings contain the variables used as dependent variables, and the adjusted R-Square denoting the significance for each model. Each row contains variables used as independent variables. Please observe the highlighted items were significant, and used in creating the path analysis in Figure 4.10 The path coefficients listed in Table 4.13 and the path diagram in Figure 4.10 provides an analysis of all independent variable measures for community involvement, 116 government performance, economic development effort, and controls with a dependent variable of median household income 2004 representing wealth within each city. 117 Table 4.13 Path Coefficients and Significance Putna m R-sq = .054 Olson R-sq = .069 Voter Turnou t R-sq = .063 No. of Orgs R-sq =.063 IDA R-sq = .076 Main Street R-sq =.084 Input / Outpu t R-sq = .095 GFOA R-sq = .105 Progra ms R-sq = .263 Strategi c Plans .141 Tax Incentive s R-sq = .202 MHI04 R-sq = .536 HS Diploma .030 .171*** .249*** .003 .188*** - .138*** .141** .296*** -.234*** -.165** -.168*** .356*** Transportation Access -.086** -.088** .023 .191*** .084** -.002 .065 -.033 .090*** .223*** .048 - .103*** Violent Crime -.006 .114** .093 .033 .218*** .059 .225** * .051 .090 -.090 -.049 -.009 Property Crime .252*** .185*** -.105* .156*** .151*** .161*** -.012 .113* -.107* -.062 -.075 - .276*** Council / Manager -.043 - .144*** -.035 .033 -.055 -.039 -.002 .198*** .002 .063 -.066 .005 Putnam -.039 -.065 -.118* -.096 -.121* -.104** Olson .028 .003 .115* .088 .221*** -.082* Voter Turnout -.086 -.127*** .010 .013 .017 .056 No. of Orgs .166** * -.040 .359*** .151*** .275*** -.033 IDA .145** * .090** .061 -.024 -.072 .013 Main Street -.014 -.008 -.004 -.004 -.006 -.068* Input / Output .133*** .199*** .269*** .063 GFOA -.042 .111** .124** .037 Programs - .183*** Strategic Plans -.023 Tax Incentives .033 *** Regression is significant at the 0.01 level. ** Regression is significant at the 0.05 level. * Regression is significant at the 0.10 level. 118 Figure 4.11 ? Path Diagram with Beta Coefficients Putnam Strategic Plans Olson -.082* Performance -.115* Standards -.068* MHI04 Main Street Programs IDA .090** GFOA Voter Turnout -.127*** Tax Incentives Number of Organizations This path diagram includes all significant relationships. The darker lines indicate that the path leads directly or indirectly to the dependent variable. The lighter lines indicate a significant relationship between the independent and intervening variables only. . *** Regression is significant at the 0.01 level. ** Regression is significant at the 0.05 level. * Regression is significant at the 0.10 level. 119 One of the major advantages of path analysis is it makes elaborating theories possible by bringing theory and data analysis into a productive interaction in which each informs the other. A path analysis of this type will tell us not only whether or not the variables in the model are related in the way we hypothesize but also what relative influence each variable has on other variables in the model. The total effects of one variable on another are equal to the value of the standardized beta coefficient of the direct path between the two plus the standardized beta coefficients of the indirect paths by which they are linked. An indirect path is equal to the products of the direct paths of which it is composed (Manheim, et. al. 2002). Table 4.14 ? Total Effect of All Independent and Intervening Measures on Median Household Income Independent Variable Total Effect on Median Household Income Community Putnam Standard -0.082 Olson Standard -.061 Voter Turnout No Significant Relationship Number of Organizations -.070 IDA 0.004 Main Street No Significant Relationship Government Performance Performance Standards -.021 GFOA Budget Awards No Significant Relationship Economic Development Effort Programs -.183 Strategic Plans No Significant Relationship Tax Incentives No Significant Relationship Controls High School Diploma .3471 Property Crime -.2947 Violent Crime -.0537 Council / Manager .015 Transportation Access -.1044 120 Table 4.14 provides the total effect on median household income, which is a composite of the independent variables on the dependent variable using path analysis. Table 4.13 provided each path coefficient and its significance, and Figure 4.10 displayed the path diagram for our model. Table 4.14 displays the effects each of the independent variables had on the dependent variable, Median Household Income. Conclusion The findings in this chapter provided evidence to support the notion that a willingness for the people in the community to come together promotes government performance, enhances the economic development effort and promotes overall wealth within the community. With the use of multiple regressions and the use of a path analysis this chapter explored relationships between community involvement, government performance, economic development efforts, and economic wealth. Specifically, this chapter provided evidence showing: ? Strong relationships exist between Putnam and Olson groups and economic development programs as Putnam groups has a relationship of (-.118) and was significant at .10 level, and Olson groups had a relationship of (.115) and was significant at the .10 level. Putnam groups were negatively related to tax incentives with a relationship of (-.121) and were significant at the .10 level. ? Particularly strong relationship between number of organizations involved in economic development decision making, and economic development effort with programs (.359), strategic plans (.151), and tax incentives (.275). All were significant at the .01 level. 121 ? Cities with low voter turnout were more likely to win GFOA budget awards as there was a negative relationship of (-.127) significant at the .01 level. ? High education attainment (.347) and low rates of property crime (-.29) have a very strong direct relationship with economic wealth, and are significant at the .01 level. The result of the preceding calculations allows for the completion of the study, and allows conclusions to be made about the overall relationship between community involvement, government performance, and economic development. Chapter 5 will analyze each hypothesis in terms of methodology set forth within this study while taking the existing literature and data results into account. This study will conclude with recommendations for setting economic development policy, and will offer suggestions for future study in this area. 122 CONCLUSION CHAPTER 5 INTRODUCTION The focus of this study was to determine whether and to what degree social capital contributes to economic wealth of cities. Government performance and economic development efforts serve as intervening variables. This study provided information which furthers our understanding of how social capital, government performance, and economic development efforts affect economic wealth both directly and indirectly, as well as whether the effects are positive or negative. This chapter is divided into five sections. Section I discusses each research question, the hypotheses, and the results. Section II details the drawbacks and difficulties within the research. Section III provides a comparison of the findings of this research to previous research. Section IV provides public policy implications for future strategies, and Section V provides recommendations of future research in public policy and administration. RESEARCH QUESTIONS This research explored the following questions and hypotheses. Q1. Does social capital improve municipal government performance? H1. In comparing American cities, greater social capital within a city, affected the government performance within the city. The social capital variable contained the study of six measures. These measures were regressed against two government performance measures to determine the relationship. The IDA measure was positive and significant for both government performance measures. The number of types of organizations involved in economic 123 development within the cities was a positive and significant measure of the number of performance standards within each city. Main Street programs proved to be insignificant to either government performance measures. Associational density measures were not significant to either government performance measures. The civic engagement measure of voter turnout was significant but negatively related to the GFOA budget award measure only. The hypothesis can be partially supported. These findings further the current literature in numerous ways. Firstly, the results highlight the benefit professional organizations with a strong education component such as IDA have on the performance of city governments. Secondly, these results indicate that increased participation by groups in decision making results in cities implementing standards of performance. This indicates that public participation positively influences the actions of city governments. These findings indicate that the mere occurrence of clubs and organizations within a city do not necessarily improve the accountability of the local government, at least in the short term. Grisham (1999) suggests social capital can be inefficient, and that it takes years for it to build and flourish. The key to positive government performance appears to hinge on the willingness of the government to be open to the decision making process and indicates that the study of social capital and the community?s involvement in government performance should include political theories of institutionalism and communitarianism particularly regarding to who has power and who gets invited to the decision making table. These ideas should be used in conjunction with the structural and agency models in economic development. 124 Q2. Does social capital increase economic development efforts and wealth? H1. In comparing American cities, social capital positively increased economic development efforts within the city. The six social capital measures were regressed against the three economic development efforts measures, and against the dependent variable. Standard Putnam groups were significant but negatively related to both economic development programs and tax incentives, and had no significant effect on the number of strategic plans implemented. Standard Olson groups were both positive and significantly related to both the programs and tax incentives measures. The civic engagement measure of voter turnout was not significant to any economic development effort measures. The community involvement measure of the number of types of organizations involved in economic development was significant for all three of the economic development effort measures. However, neither Main Street Programs nor IDA membership proved to be significant to any of the economic development effort measures. The hypothesis can be partially supported. These findings add to the current literature in numerous ways. Firstly, the results highlight that Olson style groups increase the economic development efforts taken by the city. This would indicate that unions and professional groups use their vested interest to place pressure on city governments to recruit new businesses. The governments respond by implementing development programs and offering tax incentives to businesses willing to relocate to the city. Again, the number of types of organizations particularly added a new aspect to the literature. Not only does the presence of a diverse group of organizations 125 represented increase the number of performance standards, it also increases the efforts of the city to attract economic development. This is consistent with the literature as increased participation increases manpower, allows for a better discussion of issues, and allows for greater enthusiasm for projects by the general public as they are more likely to have an investment of time and ideas into the project. Further, the finding indicates the need for further research into how the dynamics of what groups are allowed to participate in decision making, and the degree of power given to different groups affects economic development efforts on the city level. H2. In comparing American cities, social capital positively affects economic wealth within the city. Of the associational density measures, Putnam (purely social or recreational) groups and Olson (rent-seeking) groups were significant, but negatively related to median household income. The IDA, number of organizations and civic engagement measure of voter turnout did not prove to be significant for median household income. The Main Street measure was positive and significant. The hypothesis can only be partially supported. The partial and thin support of social capital on economic wealth can be best explained by stating cities in crises are more likely to come together to improve the economy than more productive cities. Key to this conclusion is the absence of the number of organizations involved in economic development. Recall many suburban cities were used in this study. In many cases, suburban cities benefit from urban sprawl and are able to see economic growth with very little effort on their part. Structural theories imply slow growth or decline may make cities more vulnerable to pressure to promote growth (Rubin and Rubin, 1987) while 126 rapidly growing places (primarily suburbs) feel little need to stimulate development and may try to limit growth (Baldassare, 1986). H3. In comparing American cities, economic development efforts increased local economic wealth. The economic development programs measure was significant but negatively related to both per capita income and median household income. Neither strategic plans nor tax incentives proved to be significant to economic wealth. The hypothesis is not supported. This finding would suggest that economic development professionals should rethink the types of economic development efforts taken to improve local economies. Suburban growth influences this finding as cities more desperate to bring jobs are more willing to create programs to influence growth. This supports the structural theory of economic development (Rubin and Rubin, 1987; Baldassare, 1986). Q3. Does municipal government performance increase economic development efforts and wealth? H1. In comparing American cities, municipal government performance positively affects economic development efforts. The performance standards measure was both positive and significant to all three economic development effort measures as expected. The GFOA budget awards measure was both positive and significant for both strategic plans and tax incentives. The evidence supports the hypothesis. This finding indicates that more professional government staff assures a more proactive government. Additionally, high performing governments are more capable of 127 developing strategic plans, creating new programs, and are well versed in understanding how to provide tax incentives. H2. In comparing American cities, municipal government performance affects economic wealth. The performance standards and GFOA budget awards measures was not significant to either per capita income or median household income. The hypothesis is not supported. H3. In comparing American cities, economic development efforts increase economic wealth. The economic development programs measure had a significant but negative influence on both economic wealth variables. Strategic plans and tax incentives were not significant. The hypothesis is not supported. Again programs are likely implemented by struggling cities that are more desperate to attract economic development than affluent suburbs. The other possibility is that these measures may not be the most appropriate measures in studying the effect of government performance on economic wealth in the short-term. Table 5.1 shows the overall support for each question and hypothesis. 128 Table 5.1 Support of Questions and Hypotheses Question Hypothesis Support Q1. Does social capital improve municipal government performance? H1. In comparing American cities, greater social capital within a city, affected the government performance within the city. Partial Q2. Does social capital increase economic development efforts and wealth? H1. In comparing American cities, social capital positively increased economic development efforts within the city. H2. In comparing American cities, social capital positively affects economic wealth within the city. H3. In comparing American cities, economic development efforts increased local economic wealth. Partial Partial No Q3. Does municipal government performance increase economic development efforts and wealth? H1. In comparing American cities, municipal government performance positively affects economic development efforts. H2. In comparing American cities, municipal government performance affects economic wealth. H3. In comparing American cities, economic development efforts increase economic wealth. Yes No No Figure 5.1 Final Path Analysis Government Performance + + Community - Involvement Economic Wealth + - Economic Development Effort 129 DRAWBACKS AND DIFFICULTIES WITH RESEARCH All research has some limitations based on the availability of resources, information, and / or project design and this research is not an exception. Steps were taken to diminish any limitations which would jeopardize the integrity of the research. Though founded in a solid research design, there are significant limitations to the study. Firstly, the expense and availability of resources limited the study to a cross-sectional study and would not allow for the examination of variables over time. This limited the research to the study of economic wealth instead of economic growth and did not allow for research to determine whether or not particular variables were contributing to or taking away from the wealth in the city over time. Studies showing the effectiveness of the community and government over time would also have included an element of the growth and decline of dominant industries within each city. The lack of a time element led to potential problems with circular reasoning between the community and control variables, particular for crime and education. In creating the study, there was a lack of availability of highly reliable civic engagement variables on the city level. Measures for voter turnout in local elections, attendance for city council meetings, or PTA meetings, or for federally mandated public meetings, would have been helpful. The measurement for Putnam and Olson groups were admittedly blunt measures accounting for the number of organizations per city. The size and viability of the organizations were not taken into account. Organizations which did not fit particular status such as IRS non-profit filing were likely ignored in the counting. A better measure would be the amount of participation within the city. The use of the 2004 ICMA Economic Development Survey had drawbacks. The prevalence of suburban cities had the potential for skewing the study towards cities which 130 likely need the least assistance. Secondly, the metro measures chosen by ICMA of Urban, Suburban, and Independent made the variable ambiguous and not useful. Geographic measures provided to be unreliable as well. COMPARISONS TO PRIOR RESEARCH Conducting research requires both originality in thought and a willingness to follow the work of others in creating a successful research design. Prior research provides great insight into what has worked in the past, and provides the researcher with a wealth of knowledge in knowing how to best approach the problem. This research started with a curiosity to learn whether or not the average citizen can make a difference in the well being of the community. This led to the study of the social capital concept and Putnam?s 1993 study of community groups in Italy. Knack?s 2003 study of Putnam and Olson groups provided the foundation of separating the types of community groups according to whether or not the group was organized with the intent of providing personal gain for the membership, or if it were organized for the pleasure of participants. This study provided a methodological clue of how to account for different types of group activity. However Knack used multi-national studies which were not applicable to studying individual cities within the United States as the data used was not available on the city level within the United States. Rupasingha, Goetz, and Freshwater (2006) provided measures of social capital for both Putnam and Olson style groups for each county within the United States. The information provided in this study served to be enormously helpful as many of the measures used by Rupasingha, et. al. in creating a county by county account of social capital could be broken down by zip code. This allowed for the research to evaluate the social capital in 131 areas if not exactly within city or town limits, to the city listed on each individuals mailing address. Goldfinger and Ferguson (2009) compared social capital to government performance on the city level. However, this study only analyzed 18 cities within the United States. By combining the methods of Rupasingha, Goetz, and Freshwater with the methods of Goldfinger and Ferguson, social capital and government performance were evaluated on a larger scale. Grisham?s studies of Tupelo, Mississippi and Putnam?s study of groups working together influenced the research to focus on power within the community and government decision making. This led to the inclusion of variables to determine whether the community was widely involved in the economic development process. The development of measures to study social capital on the city level will give researchers an abundance of new avenues to study social capital, rural and urban development, and local government performance. The model developed for this study provides insight into the connections between society, government, and economic wealth on the city level like never before. By studying the breadth of variety of organizations involved in economic development, new insights were gained into how society influences government performance and economic wealth, and how the variety of groups included in economic development efforts affected the overall performance of government and wealth within the city. The inclusion of IDA and Main Street organizations within the city provided insight into relationships with government, development efforts, and wealth and may be of service to development professional utilizing the Main Street or IDA concept to improve local communities. 132 IMPLICATIONS This research developed a model which allowed for the study of the interaction between social capital, government performance, economic development efforts, and economic wealth in cities within the United States. Previous studies have linked parts of the model used in this study together but have not combined all of the parts at the same time. This study stepped beyond the existing literature by developing methods to study social capital on the city government level by utilizing zip codes and NAICS industrial codes available through the U.S. Census Bureau. This study was distinctive in its use of the study of the number of types of organizations involved in economic development. This essentially linked theories concerning the openness of government and the inclusion of individuals to economic development efforts and overall wealth within cities. The findings in this study reveal higher numbers of types of organizations participating in economic development decision making improves the likelihood that a city will use a higher number of performance standards, or receive awards for their budgeting. Further, cities using a high number of performance standards are also more likely to utilize all three of the measures for economic development efforts. Findings suggest Olson groups are positively related to both economic development programs and tax incentives as expected. Interestingly, the use of strategic plans did not appear to provide the significant relationships that would have been expected. Lastly, there were some unexpected results. Voter turnout was negatively related to whether a city received budget awards, while Putnam groups were negatively related to the number of economic development programs utilized within the city. 133 The findings of this study have implications for economic development policy. Greater insight was obtained into the relationships and interactions between community involvement, government performance, economic development efforts, and economic wealth on the local level. This dissertation was novel by utilizing NCAIS codes to study associational density on the city level. This method was developed by expanding on the research of Rupasingha, Goetz, and Freshwater. This method will allow future researchers to consistently measure the amount of involvement within communities, and assist researchers in studying how the quantity of interaction within the community itself affects a myriad of public policy issues. This dissertation provided insight into the relationship between institutionalism theory, government performance, economic development efforts, and economic wealth on the local level. This dissertation found cities with a greater breadth of organizations involved in economic development had a positive relationship with government performance, and the higher the performance standards, the greater the efforts to improve economic development. Cities with more professional and business organizations (Olson Groups) were more likely to implement programs and offer tax incentives to promote local economic development. However, the more civic organizations (Putnam Groups) were less likely to offer economic development programs and tax incentives to promote local economic development. This dissertation indicated a negative relationship between voter turnout and whether a city won budgeting awards. This implies cities with high voter turnout either has less capacity to have highly trained professional staff (which is possible in small towns), or 134 that cities without a highly involved electorate will overcome the lack of information in the electorate?s will by assuring that the city is beyond reproach by creating meticulous budgets. PRACTICAL ADVICE This dissertation provided new insight into how society affects government performance, development efforts, and economic wealth. Many of the findings of this study have practical implications. This study indicated cities with a wide variety of organizations involved in economic development had improved government performance, and went to greater efforts to develop the community economically. City officials are encouraged to examine the human assets available to them in their community, and encourage participation. These human assets may come in the form of individuals or organizations. In a small town, it could be an act as simple as asking a high school English teacher to review a grant application. Find groups with a vested interest in the outcomes of the city to work to better the community. Use their creativity and enthusiasm to make positive changes within the community. At the same time, start building frameworks for average citizens to become involved within the city. Encourage neighborhoods to come together in neighborhood associations, precincts, or other small areas to improve their part of the city. Concerted efforts should be made to teach individuals how to come together in associations. Putnam (2000) indicated that associational groups have been on a steady decline since after World War II. The result has been that individuals no longer have the right experience to lead successful associational lives. Leaders need training in knowing how to run meetings, overcome and avoid conflicts, raise funds, and recruit volunteers. 135 Fledgling volunteer organizations are especially vulnerable to conflicts or mismanagement that can derail organizations from doing good work. School activities have the potential for becoming a breeding ground for an increase in associational life in the United States. Politically neutral initiatives such as the teaching of how to use Robert?s Rules of Order should be encouraged. FUTURE RESEARCH This dissertation established social capital and particularly associational density can be successfully studied in a multi-city study within the United States using publicly available data. Further study is needed to further define the best measures to be used in determining associational density. This study recognized community organizations have the greatest impact when included in the decision making process. Evidence suggests the inclusion of community organizations in decision making appears to be positively related to government performance. Further study is needed to determine whether community organizations are more likely to be included in well functioning governments, or whether the inclusion of community organizations leads to the use of performance standards and the winning of budget awards. The study recognized significant and positive relationships between the number of types of organizations involved in economic development decision making and the level of economic development efforts utilized within the city. This suggests the outside knowledge, perspective, manpower, and enthusiasm would have a positive effect on the number of economic development efforts being made. It would also follow that government officials would be more likely to implement such efforts to demonstrate they are working to improve conditions within the city. Further study is needed to determine how community 136 involvement and particularly the participation of community groups in making economic development decisions effects the efforts individual cities make in the level of and types of initiatives used in its economic development efforts, and whether or not the efforts lead to economic growth or wealth in the short or long term. This study indicated a better understanding of the interaction between the community and city government and the economic development efforts are essential to accessing a community?s abilities to work together and create strategies to promote prosperity. New measures should be explored to better understand how citizens are involved in their community, and if involvement leads to positive economic results. It would be ideal if this study could be replicated over a long period of time to determine if social capital, government performance, and economic development efforts make a difference in the economic growth of an area. It would also be ideal to look at quality of life measures that do not quantify the well being of a community purely in dollars and cents terms. Over time, researchers will surely find that people living in communities with an abundance of genuine concern for their fellow man live in happier, healthier places. Hopefully, society will follow suit. 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The place of social capital in understanding social and economic outcomes', Isuma: Canadian Journal of Policy Research 2:1, pp 1-17. World Value Study or World Value Survey www.aflcio.org/corporatewatch/walmart/ http://walmartwatch.org/get-the-facts/ www.createfoundation.com 154 APPENDICES 155 C O D E B O O K E c o n o m i c D e v e l o p m e n t 200 4 S e p t e m b e r 2004 Dea r C h i e f Ad m i n i s t r a t i v e O f f i c e r : I C M A i s c o n d u c t i n g a s u r v e y o n e c o n o m i c d e v e l o p m en t p r a c t i c e s i n l o c a l g o v e r n m e n t s . Th e s u r v e y r e s u l t s w i l l p r o v i d e i n f o r m a t i o n o n p r a c t i c e s , e x p e r i e n c e s , an d p o l i c i e s t h a t w i l l b e r e p o r t e d i n s e v e r a l I C M A p u b l i c a t i o n s . P l e a s e a s s u r e th e s u c c e s s o f t h i s p r o je c t b y co m p l e t i n g t h e q u e s ti o n n a i r e b y O c t o b e r 29 , 2 0 0 4 . T h a n k y o u fo r y ou r p a r t i c i pa ti o n . S i n c e r e l y , R o b e r t J . O ? N e i l l , J r . E x e c u t i v e D i r e c t o r G e n e r a l 1 . W h ic h o f t h e fo ll ow i n g s t a t e m en t s b e s t d e s c r i be s wh o ha s r e s p o n s i b ilit y fo r e c o n o m i c d e v e l op m en t i n y ou r l o c a l g o v e r n m e n t ? ( C h e c k onl y o n e . ) (1 ) a. Th e l o c a l g o v e r n m e n t ha s pr i m a r y r e s p o n s i b i l i t y fo r e c o n o m i c d e v e l o p m e n t . (2 ) b . A n o n p r o f i t d e v e l op m en t c o r p o r a ti o n ha s pr i m a r y r e s p o n s i b ilit y fo r e c o n o m i c d e v e l op m en t . (3 ) c. O t he r (P l ea s e d e s c r i be : ( ) (4 ) C h a m be r o f Co mm e r c e (5 ) M i x t u r e 2 . W h ic h o f t h e fo ll ow i n g b e s t d e s c r i be s y ou r l o c a l g o v e r n m e n t 's pr i m ar y e c o n o m i c b a s e an d f o c u s o f y ou r e c o n o m i c d e v e l op m e n t e f f o r t s ? ( C h e c k onl y on e i n e a c h c o l u m n . ) W h a t i s y o u r c u r r e n t e c o n o m i c b a s e ? ( q 2 b a s e ) V a l u e W h a t i s th e f o c u s o f y o u r e c o n o m i c d e v e l o pm e n t e f f o r t s ? ( q 2 f o c u s ) a . A g r i cu lt u r a l ( f a r m i n g an d s u p p o r ti ng i n d u s t r ie s) 1 b . Ma n u f a c t ur i ng 2 c . R e t a i l / s e r v i c e 3 d . I n s t i t u t i o n a l ( m i l i t a r y , g o v e r n m e n t , n o n p r o f i t , u n i v e r s i t i e s , c o l l e g e s , e t c . ) 4 e . R e s i d e n t i a l c o mm un it y (c o mm u t e r s ) 5 f . T o u r is m / ho s p i t a l i t y (i n cl ud i n g t r a v e l f o r p l e a s u r e , b u s i n e s s , an d t o v i s i t fa m il y a n d f r i e n d s ) 6 g . W a r e h o u s i ng / d i s t r i bu ti on 7 h . T e c h n o l og y / t e l eco mm un i ca ti o n s 8 i . O t h e r ( P l e a s e s p e c i f y . ) 9 j . Mi x t u r e 1 0 3 . W ha t p e r c e n t o f y ou r la n d a r e a i s z o n e d fo r ( p e r c e n t a g e s s h o u l d t o t a l 1 0 0 %) : 3a . C o mm e rc i a l / i n d u s t r i a l / m a n u f a c t ur i n g u s e % 3b . Re s i d e n t i a l us e % 3c . O p e n s p a c e % 3d . O t h e r % 3 d D e s c r i p t i o n ( O t h e r ) 4 . W ha t p e r c e n t o f y ou r la n d i s ta x e x e m p t ? % Appendix A 156 5 . W h ic h o f t h e fo ll ow i n g d e s c r i be s t h e c o n d i t i o n o f y ou r l o c a l g o v e r n m e n t ' s e c o n o m i c b a s e (1 ) d u r i n g t h e l a s t f iv e y ear s an d ( 2 ) w h ic h d o y o u t h i n k i t w i l l b e ov e r t h e n e x t f i v e y e a r s ? ( C h e c k onl y on e i n e a c h c o l u m n . ) L as t f i v e y e a r s ( q 5 l a s t f i v e ) Nex t f i v e y e a r s ( q 5 n e x t f i v e ) a . Ra p i d e x p a n s i o n ( m or e t ha n 25% ) 1 b . M o d e r a t e g r o w t h ( 1 0 - 2 5 % ) 2 c . S l o w g r o w t h ( l es s t ha n 10% ) 3 d . E c o n o m i c b a s e i s s t ab l e - n o r e a l g r o w t h o r d e c li n e 4 e . Slo w d e c l i n e ( l e s s t h a n 1 0 % ) 5 f . M o d e r a t e d e c li n e ( 1 0 - 2 5 % ) 6 g . Ra p i d d e c li n e ( m or e t ha n 25% ) 7 6 . D o e s y o u r l o c a l g o v e r n m e n t h a v e a w r i t t e n e c o n o m i c d e v e l o p m en t p l a n ? a . Ye s (1 ) b . N o ( 2 ) 7 . W h ic h o f t h e fo ll ow i n g p a r t i c i pa t e i n d e v e l op i n g y ou r l o c a l g o v e r n m e n t ' s e c o n o m i c d e v e l op m en t s t ra te g i es ? ( C h e c k a l l app lic ab l e. ) a . C i t y j . Pr i va t e b u s i n e s s /i n d u s t r y b . C o u n t y k . Pr i va t e o r co mm un it y e c o n o m i c d e v e l op m en t f o u n d a ti on c . S t a t e g o v e r n m e nt l . U t i l i t y d . F e d e r a l g o v e r n m e nt m . C o lle g e/ un i v e r s i t y e . C h a m be r o f Co mm e r c e n . C i t i z e n a dv is o r y bo ar d /c o mm i s s i o n f . E c o n o m i c d e v e l op m en t c o r p o r a ti on o . A d ho c c i t i ze n g r o u p g . Re g i o n a l o r g a n i za ti o n s p . O t h e r ( P l e a s e s p e c i f y . ) h . P l a n n i n g c o n s o r ti a q . O t h e r ( P l e a s e s p e c i f y . ) i . Pu b lic / pr i va t e p a r t n e r s h i p F U N D I N G E C O N O M I C D E V E L O P M E N T 8 . Ho w m uc h d i d y ou r l o c a l g o v e r n m e n t budge t fo r e c o n o m i c d e v e l op m en t ac ti v i t i e s fo r F Y 2 0 0 4 ? $ A . W ha t p e r c e n t o f t h e b u d g e t wa s f u n d e d b y ( p e r c e n t a g e s s h o u l d t o t a l 1 0 0 % ) 1 . L o c a l g o v e r n m e n t % 2 . Pr i va t e s e c t o r % 3 . O t he r % P l e a s e s p e c i f y : 9 . P l eas e i nd i ca t e wh ic h o f t h e fo ll ow i n g s o u r c e s o f g o v e r n m e n t r e v e n u e ar e u s e d t o f u n d y ou r e c o n o m i c d e v e l op m en t p r o g r a m s. ( C h e c k al l a p p l i c a b l e . ) a . L o c a l r e v e n u e s / g e n e r a l f u n d e . Re v e n u e b o n d s h . H o tel/ m o tel ta x es b . F e d e r a l g r a n ts - i n - a i d f . S p e c i a l a s s e s s m en t d i s t r i c t s i . Sales ta x c . S t a t e g r a n t s - in - a i d g . Ta x i n c r e m en t f i n a n c i ng d i s t r i c t s j . O t h e r ( P l e a s e s p e c i f y . ) d . G e n e r a l ob li ga ti o n b o n d s 10 . W ha t r o l e s d o p r i v a t e co m p a n i e s p l a y i n u n d e r w r itin g th e m a r k e t i n g e f f o r t s o f y o u r l o c a l g o v e r n m e nt ? ( C h e c k al l a p p l i c a b l e . ) a. C h a r i t a b l e i n - k i n d c o n t r i bu ti ons c. Jo i n t m a r k e ti n g p a r t n e r s h i ps b. C h a r i t a b l e cas h d o n a ti o n s d. O t he r (P l ea s e d e s c r i be : ) 11 . W ha t i s th e e x p e c t e d d o l l a r v a l u e o f p r i v a t e u n d e r w r i t i n g th a t yo u e x p e c t t o r e c e i v e i n F Y2 0 0 5 ? $ 157 T E C H N O L O G Y 12 . W h ic h o f t h e fo ll ow i n g t e c h n o l og y a p p li ca ti on s ha s y ou r l o c a l g o v e r n m e n t i m p l e m en te d a s par t o f it s e c o n o m i c d e v e l o p m e n t e f f o r t s ? ( C h e c k al l a p p l i c a b l e . ) a . K i o s k s w it h t o u c h - s c r e e n co m p u t e r s e . W eb s ite i . O t h e r ( P l e a s e s p e c i f y . ) b . H a n d - he l d co m pu t e r t e r m i n al s u se d i n t h e p er m i t an d i n s p e c ti o n p r o c e s s f . S m ar t bu il d i ng s ( e . g ., w it h t e c h n o l og y t h a t c o n t ro l s li gh t s , r e a d s s e c u r i t y c a r d s , e t c . ) j . O t h e r ( P l e a s e s p e c i f y . ) c . On - lin e s e r v i c e s ( e . g . , p er m i t a pp l i c a t i on s s ub m i t t e d on li n e) g . I n t e l l i g e n t v e h i c l e h i g h w a y s y s t e m s ( e . g . , e l e c t r o n i c t o l l c o l l e c t o r s ) d . In te r a c ti v e f a x i n g ( f a x i n g p e r m its , f o r m s , a n d a p p l i c a t i o n s fo r a f e e ) h . Fib er o p tic n et w o r k i n g /cab le B A R R I E R S T O E C O N O M I C D E V E L O P M E N T 13 . W h ic h o f t h e fo ll ow i n g b a r r i er s t o e c o n o m i c d e v e l op m en t ha s y ou r l o c a l g o v e r n m e n t en c o u n t er ed ? ( C h e c k al l a p p l i c a b l e . ) a . A v a i l a b i l i t y o f la n d k . L e n g t h y p er m it p r o ce s s b . C os t o f la nd l . E n v i r o n m en ta l r e g u l a ti o n s c . L ac k o f bu il d i n g a v aila b il it y ( du e to s p ac e or co s ts ) m . C i t i z e n o p p o s i t i o n d . I n ad eq u ate i n f r a s tr u ct u r e ( e. g . , n o f ib er op tic ca b le) n . L a c k o f p o l i t i c a l s u p p o r t e . L a c k o f s k i l l e d la bo r (A pp l i c a n t s d o no t h a v e t h e n e c e s s a r y s k i l l s ) o . Dec li n i n g m a r k e t du e t o l os s o f popu l a ti on f . H i g h c o s t o f la bor p . Hig h co s t o f h o u s i n g g . Li m ited nu m b er of m aj o r e m p lo y e rs q . P oo r qu alit y o f lif e (i n a d e qu at e e du ca ti on , r ec r ea ti on , a n d ar ts /c u lt u r al p r og ra m s) h . L a c k o f cap i t a l / f u n d i ng r . T r a f f i c c o n g e s ti on i . T ax es s . O t h e r ( P l e a s e s p e c i f y . ) j . Dis ta n ce f r o m m aj o r m ar k et s t . O t h e r ( P l e a s e s p e c i f y . ) A . P l e as e i n d i c a t e th e to p tw o b a r r i e r s t o e c o n o m i c d e v e l o p m en t b y p u t t i n g th e c o r r e s p o n d i n g l e t t e r i n th e s p a c e p r o v i d e d . 1 . 2 . A . W ha t s t ra te g i e s ar e y o u us i n g t o a d d r e s s t h e t o p t w o b a r r i e r s ? E C O N O M I C D E V E L O P M E N T A C T I V I T I E S 14 . D o e s y ou r l o c a l g o v e r n m e n t s u p p o r t an y o f t h e fo ll ow i n g p r o g r a m s t o p r o m o t e o r s u p p o r t e c o n o m i c d e v e l op m en t ? a . C o mm un it y d e v e l op m en t c o r p o r a ti o n Yes No d . Jo b t ra i n i ng Yes No b . C o mm un it y d e v el op m e n t l o a n f u n d Yes No e . C h il d car e p r o g r a m s ( i nc l ud i n g af te r s c h o o l an d p a r k s / re c p r o g r a m s) Yes No c . Mi c r o e n t e r p r is e p r o g r a m Yes No f . O t he r (P l eas e d e s c r i b e ) Yes No 158 15 . W ha t p e r c e n t o f y o u r o v e r a l l e c o n o m i c d e v e l o p m en t a c t i v i t i e s ar e f o c u s e d o n ( p e r c e n t a g e s s h o u l d t o t a l 100 % ) a . B us i n e s s re te n ti o n % b . B us i n e s s a tt r a c ti on /r e c r u it m en t % c . S m a l l b u s i n e s s d e v e l op m en t % B u s i n e s s R e t e n t i o n 16 . D o e s y o u r l o c a l g o v e r n m e n t h a v e a w r i t t e n b u s i n e s s r e t e n t i o n p l a n ? a . Ye s (1 ) b . N o ( 2 ) 17 . Pl e a s e i n d i c a t e w h i c h o f th e f o l l o w i n g b u s i n e s s r e t e n t i o n a c t i v i t i e s y o u r l o c a l g o v e r n m e n t c o n d u c t s . a . L o c a l g o v e r n m e n t r e p r e s e n t a t i v e ca ll s on l o c a l co m p a n y i . Re p l ac i n g i m por t s w it h l o c a ll y s u p p lie d g o o d s b . L o c a l g o v e r n m e n t r e p r e s e n t a t i v e ca ll s on na ti o n a l co m p a n y h e a d q u a r t e r s j . E x p o r t d e v e l op m en t a s s i s t a n c e c . S u r v ey s o f l o c a l b u s i n e s s k . P ar tn er in g w it h o th er n o n - g o v er n m e n tal o r g an izatio n s ( e. g . , c h a m b er of co mm er ce , p r i v ate f ir m s) d . B us i n e s s r o u n d t ab l e l . P ar tn er in g w it h o th er l o ca l g o v er n m e n ts e . Re vo l v i n g l oa n f u n d p r o g r a m m . B u s i n es s cl u s ter s /in d u s tr i al d is tr icts f . O m b u d s m a n p r o g r a m n . O t h e r ( P l e a s e s p e c i f y . ) g . A c h i e v e m en t aw a r d s o . O t h e r ( P l e a s e s p e c i f y . ) h . L o c a l b u s i n e s s p u b l i c i t y p r o g r a m ( c o mm u n i t y - w i d e ) B u s i n e s s A t t r a c t i o n / R e c r u i t m e n t 18 . D o e s y ou r l o c a l g o v e r n m e n t w an t t o a tt r a c t ne w b u s i n e s s ? a . Ye s (1 ) b . N o (2 ) ( I f ? n o , ? p l e a s e g o t o q u e s ti o n 2 4 . ) 19 . D o e s y o u r l o c a l g o v e r n m e n t h a v e a w r i t t e n b u s i n e s s a t t r a c t i o n p l a n ? a . Ye s (1 ) b . N o ( 2 ) 20 . W h ic h o f t h e fo ll ow i n g m et h o d s doe s y ou r l o c a l g o v e r n m e n t us e t o a tt r a c t b u s i n e s s ? a . Pr o m o ti on a l a n d a dv e r t i s i n g a c t i v i t i e s ( e . g . , d i r e c t m a i l , C D - R O M , v i d e o , o t h e r m e d i a a d v e r t i s i n g ) f . L o c a l g o v e r n m e n t r e p r e s e n t a t i v e ca ll s o n p r o s p e c ti v e co m p a n i e s b . A m b a s s a d o r p r o g r a m g . W o r k s w i t h t h e C h a m b e r o f C o mm e r c e c . P a r t i c i p a t i o n i n in d u s tr y s p ec if ic t r a d e s h o w s / c o n f e r e n c e s h . Of f er h ig h q u a lit y of li f e ( g o o d ed u ca tio n , r ec r ea tio n , an d ar ts /c u lt u r al p r o g r a m s) d . Pa r t i c i pa ti o n i n s t a t e - s p o n s o r e d t r a d e m i s s i o n s i . O t h e r ( P l e a s e s p e c i f y . ) e . W e b s ite j . O t h e r ( P l e a s e s p e c i f y . ) 21 . D o e s y ou r ju r i sd i c t i o n h a v e s p e c i a l t e c h n o l og y z o n e s t ha t ar e d e s i gne d t o e n c o u r a g e t e c h n o l og y - re l a t e d i n d u s t r ie s a n d b u s i n e s s e s t o m ov e t o y ou r ju r i sd i c t i on ? a . Ye s (1 ) b . N o ( 2 ) If " yes , " p lease in d icate th e i n ce n tives u s ed in t h e tech n o lo g y z o n es to en co u r a g e tec h n o lo g y - r elate d in d u s tr y an d b u s i n e s s . ( C h ec k a ll a p p lica b le .) a . R ed u ctio n in p er m i t f ee s e . Fle x i b ilit y i n s p ec ial z on i n g b . R ed u ctio n in u s er f ee s f . O t h e r i n c e n t i v e s ( P l e a s e s p e c i f y . ) c . R ed u ctio n in g r o s s r ec eip ts ta x g . O t h e r i n c e n t i v e s ( P l e a s e s p e c i f y . ) d . Or d in an ce e x e m p tio n s 22 . P l e a s e i d e n t i f y y ou r c o m p e t i t i o n i n a t t r a c t i n g i nv e s t m e n t i n y ou r ju r i s d i c t i on . ( C h e c k al l a p p l i c a b l e . ) a. N e a r b y l o c a l g o v e r n m e n t s d. O t he r s t a t es b. O t he r l o c a l g o v e r n m e n t s w it h i n t h e s t a t e e. F o r e i g n c o u n t r i es c. L o c a l g o v e r n m e n t s i n s u r r o u n d i n g s t a t es f. O t h e r ( P l e a s e s p e c i f y . ) 159 23 . P l eas e es ti m a t e t h e nu m be r o f j o b s an d ne w b u s i n e s s e s i n y ou r co mm un it y o v e r t h e la s t f i v e y ear s a s a r e s u l t o f y o u r b u s i n e s s a tt r a c ti on / r e c r u it m en t e f f o r t s . a . Nu m be r o f jo b s S m a l l B u s i n e s s D e v e l o p m e n t b . Nu m be r o f ne w b u s i n e s s e s 24 . D o e s y o u r l o c a l g o v e r n m e n t h a v e a w r i t t e n s m al l b u s i n e s s d e v e l o p m en t p l a n ? a . Ye s (1 ) b . N o ( 2 ) 25 . W h ic h o f t h e fo ll o w i n g doe s y ou r l o c a l g o v e r n m e n t o f f e r fo r s m a l l b u s i n e s s d e v e l op m en t ? ( C h e c k al l a p p l i c a b l e . ) a . Re vo l v i n g l oa n f u n d g . M a r k e t i n g a s s i s t a n c e b . S m a l l b u s i n e s s d e v e l op m en t c en te r h . Ma n a g e m e n t t ra i n i ng c . B u si n es s i n c ub at o r i . E x e c u t i v e o n l o a n / m e n t o r d . Mi c r o e n t e r p r is e p r o g r a m j . Ot h e r i n ce n ti v e s ( P l e a s e s p e c i f y . ) e . M atch in g i m p r o v e m e n t g r a n ts ( p h y s ical u p g r ad es to b u s i n es s p r o p er ties ) f. V e n d o r /s u p p lie r m a t c h i ng k . Ot h e r i n ce n ti v e s ( P l e a s e s p e c i f y . ) B u s i n e s s I n c e n t i v e s 26 . D o e s y ou r l o c a l g o v e r n m e n t o f f e r b u s i n e s s i n c e n ti v e s ? a . Ye s (1 ) b . N o ( 2 ) A n s w e r q u e s ti on s 2 7 - 3 2 on l y i f y o u c h e c k e d " y e s " i n q u e s ti o n 26. 27 . P l eas e i nd i ca t e wh ic h o f t h e fo ll ow i n g i n c e n ti ve s y ou r l o c a l g o v e r n m e n t o f f e r s . ( C h e c k al l a p p l i c a b l e . ) a . Ta x a b a t e m en ts k . G r a n t s b . Ta x c r e d i t s l . Z o n i ng / p e r m i t a s s i s t a n c e c . Ta x i n c r e m en t f i n a n c i ng m . O n e - s t o p p e r m i t i s s u a n c e d . L o c a ll y d e s i g n a te d en te r p r i s e z o n e s n . U t i l i t y r a t e re du c t i o n e . Fed er al/s tate d esi g n ated e n ter p r is e zo n es o . Re gu l a t or y f l e x i b i l i t y f. S p e c i a l a s s e s s m en t d i s t r i c t s p . R e l o c a t i o n a s s i s t a n c e g . F r e e la n d o r la n d wr it e d o w n s q . E m p l o y e e s c r e e n i ng h . I n f r a s t r u c t ur e i m p r o v e m e n t s r . Tra i n i n g s u p p o r t i . S u b s i d i ze d bu il d i n g s s . O t h e r ( P l e a s e s p e c i f y . ) j . L o w - c o s t l o a n s t . O t h e r ( P l e a s e s p e c i f y . ) A . P l e a s e i n d i c a t e th e to p tw o m o s t fr e q u e n t l y u s e d i n c e n t i v e s b y p u t t i n g th e c o r r e s p o n d i n g l e t t e r i n th e s p a c e p r o v i d e d . 1 . 2. 28 . D o y o u r e q u i r e a p e r f o r m an c e a g r e e m en t a s a c o n d iti o n fo r p r o v i d i n g b u s i n e s s i n c e n ti v e s ? a . A lw a y s (1 ) b . So m e ti m e s (2 ) c . N e v e r ( 3 ) 29 . D o yo u p e r f o r m a c o s t / b e n e f i t a n a l y s i s p r i o r t o o f f e r i n g b u s i n e s s i n c e n t i v e s ? a . Ye s (1 ) b . N o ( 2 ) 30 . D o e s y ou r l o c a l g o v e r n m e n t m e a s u r e t h e e f f e c ti v e n e s s o f b u s i n e s s i n c e n ti v e s ? a . Ye s (1 ) b . N o ( 2 ) A . I f ? y e s ,? p l e a s e i d e n t i f y w h i c h o f th e f o l l o w i n g m e a s u r e s ar e u s e d . ( C h e c k al l a p p l i c a b l e . ) a . A m oun t o f jo b s c r e a t e d b y t h e ne w b u s i n e s s e . Co m p an y r e v e n u e / s a l e s b . A m oun t o f m o n e y i n v e s t e d i n c o n s t r u c ti o n m a t e r i a l s an d la bo r f . C o s t/ b e n e f i t a n a l y s i s c . N e w do lla r s i nv e s t e d i n la n d g . O t h e r ( P l e a s e s p e c i f y . ) d . Nu m b er of n e w b u s i n e s s e s r el o ca tin g or ex p a n d in g in j u r is d ictio n 31 . P l e a s e i n d i c a t e an y c h a n g e i n th e d o l l a r v a l u e o f th e a v e r a g e b u s i n e s s i n c e n t i v e p a c k a g e o v e r th e la s t f i v e y e a r s ? ( C i r c l e o n e n u m b e r . ) M u c h l a r g e r A b o u t th e s a m e M u c h l e s s 1 2 3 4 5 32 . D o e s y ou r l o c a l g o v e r n m e n t e v e r r e q u i r e a p e r c e n ta g e o f ne w e m p l o y ee s t o b e h i re d f r o m w it h i n t h e co mm un i t y ? a . Ye s (1 ) b . N o ( 2 ) I f ? y e s , ? p l eas e d e s c r i b e t h e r e q u i re m e n t : 160 L o c a l G o v e r n m e n t P r o f i l e 33 . D o e s y ou r l o c a l g o v e r n m e n t us e p e r f o r m an c e m e a s u r e s t o a s s e s s t h e e f f e c ti v e n e s s o f it s e c o n o m i c d e v e l op m en t e f f o r t s? a . Ye s (1 ) b . N o ( 2 ) A . I f " y e s , " w h i c h o f th e f o l l o w i n g p e r f o r m a n c e m e a s u r e s ar e u s e d (C h e c k al l a p p l i c a b l e . ) 1 . I n p u t m e a s u r e s ( e . g . , nu m be r o f s t af f h o u r s e x p e n d e d b y p r o g r a m ) 2 . O u t p u t m e a s u r e s ( e . g . , nu m be r o f o r g a n i z a t i o n s t h a t r e c e i v e a s s i s t a n c e b y p r o g r a m ) 3 . E f f i c i e n c y m e a s u r e s ( e . g . , p r o g r a m e x p e nd it u r e s pe r es ti m a t e d ta x do lla r s g e n e r a te d) 4 . O t he r ( P l e a s e s p e c i f y . ) 34 . W h ic h o f t h e fo ll ow i n g ta xe s doe s y ou r l o c a l g o v e r n m e n t le v y an d w h a t i s t h e ra te ? T yp e o f t a x J u r i sd ic t i o n ha s t a x T a x r a t e a . R ea l p r o p e r t y ta x Yes ( 1 ) No ( 2 ) ra t e pe r $ 1 , 0 0 0 o f a s s e s s e d va l u e % b . Pe r s o n a l p r o p e r t y ta x Yes ( 1 ) No ( 2 ) R a t e % c . L o c a l i n c o m e ta x Yes ( 1 ) No ( 2 ) R a t e % d . L o c a l sa le s ta x Yes ( 1 ) No ( 2 ) R a t e % e . O t h e r l o c a l ta x ( ( P l e a s e s p e c i f y . ) Yes ( 1 ) No ( 2 ) R a t e % f . O t h e r l o c a l ta x ( ( P l e a s e s p e c i f y . ) Yes ( 1 ) No ( 2 ) R a t e % 35 . Ho w m a n y s c h o o l s ar e i n y ou r ju r i sd i c t i o n ( b o t h p u b l i c / pr i va te )? a . K - 12 P l e a s e i n d i c a t e i f yo u e x p e c t a n i n c r e a s e o r d e c r e a s e i n t h e n um b e r o f s c h o o l s o v e r th e n e x t f i v e (5 ) y e a r s . No . o f s c h o o l s I n c r e a s e (1 ) D e c r e a s e ( 2) b . J u n i o r co lle g e (2 - y e a r ) c. V o ca ti on al/tec hn ica l d . U n i v e r s i t y / c o l l e g e 36 . P l eas e p r o v i d e t h e fo ll ow i n g d e s c r i p ti v e i n f o r m a ti o n : a . Me d i a n c o s t o f a s i ng l e - fa m il y d w e l l i ng $ b . Me d i a n r e n t a l c o s t o f t wo - b e d r o o m a p a r t m en t ( m o n t h l y) $ c . H o w m a n y ho t e l/ m o t e l r o o m s # r o o m s d . A p p r o x i m a t e l y w h a t p e r c e n t o f y ou r l o c a l g o v e r n m e n t ' s a n n u a l r e v e n u e i s f r o m t o u r is m % e . Pe r ca p it a p e r s on a l i n c o m e $ f . Pe r cap it a p r o p e r t y ta x r e v e n u e $ g . W ha t p e r c e n t o f t h e r e s i d e n t s i n y ou r ju r i sd i c t i o n ar e r e ti r e e s % h . U n e m p l o y m e n t ra t e % 37 . W h ic h o f t h e fo ll ow i n g ar e i n y ou r ju r i sd i c t i o n ? a . R a i l r o a d c. Po r t e. Ma jo r w a t e r w ay b . A i r p o r t d. T r u c k r o u t e f. Ma jo r h i g h w ay Na m e : T i t l e : Te le p h o n e nu m b e r : E - m a i l a d d r e s s : P l e a s e s e n d c o p i e s o f y ou r s m al l b u s i n e s s d e v e l o p m en t p l a n s , a t t r a c t i o n p l a n s , an d r e t e n t i o n p l a n s t o I C M A . T h a n k y o u fo r y ou r p a r t i c i p a t i n g i n th e surve y . P leas e f ax the surve y to ( 202) 962 - 3500 or m ail t o: E ve li n a M ou ld e r , Dir e c t o r of S u r ve y Re se a r c h , ICM A, 777 N or t h Capi t ol S t ., NE, S u ite 500, W ash in gt on , DC 20002 - 4201. 161 DATASETS SURVEY CODES ID (iMISID): iMIS ID, 8 spaces numeric. Used to identify records by code. CASEID: Sequence number, 8 spaces numeric. Used to identify records by code prior to 1996. UTYPE: Record type, 3 spaces numeric. Code used to identify and/or differentiate between files. 1 = All U.S. municipalities/incorporated places and independent cities; also city-county consolidations that function as city governments 2 = All U.S. counties defined by Census Bureau plus city-county consolidations that function as county governments UPOP: Population code, 3 spaces numeric. Code used to identify record population group without continuous sorting on population figure. 0 = Over 1,000,000 5 = 25,000 - 49,999 1 = 500,000 - 1,000,000 6 = 10,000 - 24,999 2 = 250,000 - 499,999 7 = 5,000 - 9,999 3 = 100,000 - 249,999 8 = 2,500 - 4,999 4 = 50,000 - 99,999 9 = Under 2,500 U90POP: 1990 population, 11 spaces numeric. Actual population according to 1990 Census. U00POP: 2000 population, 11 spaces numeric. Actual population according to 2000 Census. EST_CENSUS_POP: Population estimates, 11 spaces numeric. Actual population estimates from US Census. EST_POP_YEAR: Population estimates year. 5 spaces numeric. UJURIS: Jurisdiction, 24 spaces alpha. Supplies name of municipality or county identified by Sequence Number. UJURIS1: Jurisdiction, 24 spaces alpha. Supplies name of municipality or county identified by Sequence Number. USTATE: State code, 4 spaces alpha. Supplies standard alphabetic post office state abbreviations for mailing purposes. USTATE#: State number assigned by the US Census Bureau. Refer to attachment. UCNTY#: County number within each state assigned by the US Census Bureau. Appendix B 162 UPHONE: Municipal Phone Number, 12 spaces numeric. Shows phone number, preceded by the area code for either the municipal building/office/courthouse or some official such as the manager, clerk, mayor/chairperson of the board. UREGN: Geographic Region, 3 spaces numeric. Places municipality in its proper geographic region (groupings of above geographic divisions) as defined by the U.S. Census Bureau. 1 = Northeast (New England and Mid-Atlantic) 2 = North Central (East North-Central and West North-Central) 3 = South (South Atlantic, East South-Central, and West South-Central) 4 = West (Mountain and Pacific Coast) UGRAPH: Geographic division, 3 spaces numeric. Places municipality in its proper geographic region (groupings of above geographic divisions) as defined by the U.S. Census Bureau. 1 = New England (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont) East of the Mississippi River. 2 = Mid-Atlantic (New Jersey, New York, Pennsylvania) East of the Mississippi River. 3 = East North-Central (Illinois, Indiana, Michigan, Ohio, Wisconsin) East of the Mississippi River. 4 = West North-Central (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota) West of Mississippi River. 5 = South Atlantic (Delaware, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia, District of Columbia) East of Mississippi River. 6 = East South-Central (Alabama, Kentucky, Mississippi, Tennessee) East of the Mississippi River. 7 = West South-Central (Arkansas, Louisiana, Oklahoma, Texas) West of the Mississippi River. 8 = Mountain (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming) West of the Mississippi River. 9 = Pacific Coast (Alaska, California, Hawaii, Oregon, Washington) West of the Mississippi River. UFOG: Form of Government, 3 spaces numeric. Identifies municipality's/county's current form of government. Cities 1 = Mayor-council (MC) 2 = Council-manager (CM) 3 = Commission (CO) 4 = Town meeting (TM) 5 = Representative town meeting (RT) County 6= Commission (C) 7= Council-administrator (council-manager) (CM) 8= Council-elected executive (CE) 163 UID: ID Type, 3 spaces numeric. Indicates whether it is a city, town, village, township district, plantation, borough, county or parish. 1 = City (c) 6 = District (d) 2 = Town (t) 7 = County (cn) 3 = 4 = Village (v) Township (tp) 8 = 9 = Parish (p) Plantation (pl) 5 = Borough (b) UMETRO: Metro Status, 3 spaces numeric. Indicates whether municipality (record) is located within an MSA (Metropolitan Statistical Area) as defined/designated by the U.S. Office of Management & Budget (OMB)). 1 = Central (city = core city in an MSA; central counties are these in which a central city is located) 2 = Suburban (city/county located in MSA) 3 = Independent (city/county not located in MSA) FIPS_PLACE_CODE: Unique identifier assigned by US Census Bureau. ICMA_REGION CODE: Membership codes. There are five membership regions. The states in the membership regions are different than the Census region states. 1= Northeast region (NE): Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont, Delaware, District of Columbia, Maryland, New Jersey, New York, Pennsylvania. 2= Southeast region (SE): Florida, North Carolina, Kentucky, South Carolina, Tennessee, West Virginia, Alabama, Georgia, Mississippi, Louisiana, and Virginia. 3= Midwest region (MW): Iowa, Minnesota, Ohio, Wisconsin, Illinois, Indiana, Michigan, Missouri. 4= Mountain Plains region (MP): Arizona, New Mexico, Arkansas, Colorado, Idaho, Kansas, Montana, Nebraska, North Dakota, Oklahoma, South Dakota, Texas, Wyoming, Utah. 5= West Coast region (WC): Alaska, California, Hawaii, Nevada, Oregon, Washington. 164 01 ALABAMA STATE CODES 45 SOUTH CAROLINA 02 ALASKA 46 SOUTH DAKOTA 03 ------ 47 TENNESSEE 04 ARIZONA 48 TEXAS 05 ARKANSAS 49 UTAH 06 CALIFORNIA 50 VERMONT 07 ------ 51 VIRGINIA 08 COLORADO 52 ------ 09 CONNECTICUT 53 WASHINGTON 10 DELAWARE 54 WEST VIRGINIA 11 DISTRICT OF COLUMBIA 55 WISCONSIN 12 FLORIDA 56 WYOMING 13 GEORGIA 14 ------ 15 HAWAII 16 IDAHO 17 ILLINOIS 18 INDIANA 19 IOWA 20 KANSAS 21 KENTUCKY 22 LOUISIANA 23 MAINE 24 MARYLAND 25 MASSACHUSETTS 26 MICHIGAN 27 MINNESOTA 28 MISSISSIPPI 29 MISSOURI 30 MONTANA 31 NEBRASKA 32 NEVADA 33 NEW HAMPSHIRE 34 NEW JERSEY 35 NEW MEXICO 36 NEW YORK 37 NORTH CAROLINA 38 NORTH DAKOTA 39 OHIO 40 OKLAHOMA 41 OREGON 42 PENNSYLVANIA 43 ------ 44 RHODE ISLAND 165 Appendix C Measures Considered for the Study Independent Variables Putnam Raw Olson Raw Control Variables Population Population Density Homogeneity Geographic Region Dependent Variables Change in Per Capita Income Change in Median Household Income Total Income by City Future Growth Opinion Past Growth Opinion Median Home Value 166 APPENDIX D MEASURES CONSOLIDATED FOR THE STUDY Appendix D shows different combinations of independent and dependent variables used in regressions along with the measure for and its significance. Putnam Raw and Putnam Standard measures were used as the dependent variables in these regressions. Regressions Dependent Variable Independent Variables and Significance Regression 1 Putnam Raw All Independent variables .837*** Regression 2 Putnam Standard All Independent variables .831*** Regression 3 Putnam Standard Standardized Olson, and Standardized Number of Organizations in Economic Development, no use of population 2000, No Raw Putnam or Olson. .578*** Regression 4 Putnam Raw Raw Olson and non- standardized Number of Organizations in Economic Development, and population 2000. .605*** Regression 5 Putnam Standard Use of Olson Standard, but non- standardized Number .550*** 167 of Organizations in Economic Development. Control Variables. Appendix E provides correlations between all of the possible control variables being considered for this study. Note high correlations between homogeneity, the prevalence of high school diplomas and crime. The Form of Government variables were also very highly correlated with each other. Correlations HS_DIPLOMA V_CRIME P_CRIME ACCESS COUNCIL_MG R HS_DIPLOMA Pearson Correlation 1 -.518(**) -.511(**) -.037 .019 Sig. (2-tailed) .000 .000 .362 .639 N 615 508 508 615 615 V_CRIME Pearson Correlation -.518(**) 1 .619(**) .006 .021 Sig. (2-tailed) .000 .000 .897 .634 N 508 517 517 517 517 P_CRIME Pearson Correlation -.511(**) .619(**) 1 .037 -.042 Sig. (2-tailed) .000 .000 .402 .340 N 508 517 517 517 517 ACCESS Pearson Correlation -.037 .006 .037 1 .045 Sig. (2-tailed) .362 .897 .402 .255 N 615 517 517 630 630 COUNCIL_MGR Pearson Correlation .019 .021 -.042 .045 1 Sig. (2-tailed) .639 .634 .340 .255 N 615 517 517 630 630 ** Correlation is significant at the 0.01 level (2-tailed). 168 Appendix F below provides the un-standardized beta coefficient and standard error for multiple regression analyses similar to regressions in table 4.9. The differences in figures are Putnam standard and Olson standard (organizations per 10,000 people) data has been replaced with Putnam raw and Olson raw data (number of organizations per city), and the population data for 2000 has been added. Regression Results for GFOA Awards and Performance Standards (Controlling for Population) Variable GFOA Awards Adj. R-Square = .143 Performance Standards Adj. R-Square = .106 Un-standardized Beta coefficient Un-standardized Beta coefficient Standard Error Standard Error Putnam Raw .000 -.6.45E-005 .001 .001 Olson Raw -.002 -.003 .002 .004 Population 2000 1.47E-006 ***/ .000 1.81E-006** / .000 Main Street -.011 .032 .051 .026 IDA -.022 .329 .096 .217 Voter Turnout -.581** -.766 .232 .518 Number of Organizations involved in ED -.008 .044*** .006 .015 Council/Manager .213*** -.042 .050 .112 Transportation Access -.010 .032 .012 .026 High School Diploma 1.417*** 1.394** .272 .636 Violent Crime 2.83E-005 .001*** .000 .000 Property Crime 2.45E-005* -1.5E-006 .000 .000 *** Regression is significant at the 0.01 level. ** Regression is significant at the 0.05 level. * Regression is significant at the 0.10 level. 169 Appendix G below provides the un-standardized beta coefficient and standard error for multiple regression analyses similar to regressions in Table . The differences in figures are Putnam standard and Olson standard (organizations per 10,000 people) data has been replaced with Putnam raw and Olson raw data (number of organizations per city), and the population data for 2000 has been added. (((CHANGE #s Variable Programs Adj. R-Square =.271 Strategic Plans Adj. R-Square =.142 Tax Incentives Adj. R-Square = .188 Un-standardized Beta coefficient Un-standardized Beta coefficient Un-standardized Beta coefficient Standard Error Standard Error Standard Error Putnam Raw -.001 -.003* .001 .002 .002 .004 Olson Raw .017*** .005 .023* .006 .006 .012 Population 2000 -5.1E-007/.000 2.16E-006/.000 -1.1E-007 / .000 Main Street -.103 -.024 -.115 .167 .162 .333 IDA .013 -.068 -.1.461** .334 .313 .643 Voter Turnout .078 .203 .753 .776 .750 1.540 Number of Organizations involved in ED .162*** .063*** .232*** .023 .022 .046 Council /Manager .036 .185 -..497 .169 .164 .337 Transportation Access .053 .173*** .051 .039 .038 .078 H.S. Diploma -3.784*** -2.010** -4.725*** .972 .939 1.928 Violent Crime .000 .000 .000 .000 .000 .001 Property Crime -8.3E-005* -2.7E-005 -9.9E-005 .000 .000 .000 Performance Standards .231*** .288*** .849*** .081 .079 .162 GFOA Awards -.180 .282* .549* .150 .147 .301 *** Regression is significant at the 0.01 level. ** Regression is significant at the 0.05 level. * Regression is significant at the 0.10 level. 170 Appendix H Variable Per Capita Income Growth Adj. R-Square = .021 Median Household Income Growth Adj. R-Square = .076 Change in Total Income 99- 04 Adj. R-Sq = .010 Economic Development Opinion Last 5 Years Adj. R-Square = .034 Economic Development Opinion Next 5 Years Adj. R-Square = .043 Un-standardized Beta coefficient Un- standardized Beta coefficient Un- standardized Beta coefficient Un-standardized Beta coefficient Un-standardized Beta coefficient Standard Error Standard Error Standard Error Standard Error Standard Error Putnam Standard .000 .000 .002 -.001 .007 .003 .001 .003 .009 .007 Olson Standard -.017 -.005 -.023* .072* .062** .013 .004 .014 .041 .031 Main Street -.101 -.018 -.089 -.092 -.215* .054 .015 .056 .165 .127 IDA -.074 .000 -.036 .338 .343* .088 .025 .091 .271 .205 Voter Turnout .339 .243*** .511** -.732 -.407 .246 .073 .259 .763 .582 Number of Organizations involved in ED -.002 -.002 -.004 -.022 -.005 .008 .002 .008 .025 .019 Council /Manager .003 .010 -.013 .011 -.057 .053 .016 .056 .165 .125 Transportation Access .004 -.002 -.006 .005 .056* .014 .004 .014 .040 .030 H.S. Diploma -.097 -.259*** -.356 -.630 -.362 .297 .092 .332 .968 .734 Violent Crime 8.66E-005 1.91E-005 -1.31E-005 .000 .000 .000 .000 .000 .000 .000 Property Crime -2.11E-005 -1.58E-005*** -1.40E-005 7.10E-005* -6.05E-006 .000 .000 .000 .000 .000 Performance Standards -.012 .005 .013 -..106 -.114* .020 .008 .028 .083 .066 GFOA Awards .134*** -.002 .096* -.340** -.134 .049 .014 .050 .148 .114 ED Programs .005 .001 .005 .073 -.030 .019 .005 .018 .053 .041 Strategic Plans .015 -.001 .013 .066 -.015 .019 .005 .018 .054 .041 Tax Incentives -.006 -.002 .000 .015 .012 .009 .003 .009 .028 .021 171 Appendix I show regressions for all dependent variables using raw data for Putnam and Olson groups. Variable Per Capita Income 99 Adj. R-Square = .415 Per Capita Income Growth Adj. R- Square =. Median Household Income 99 Adj. R-Square =.538 Median Household Income Growth Adj. R-Square = .076 Change in Total Income 99-04 Adj R-Sq = .005 Economic Development Opinion Last 5 Years Adj. R-Square = .032 Economic Development Opinion Next 5 Years Adj. R-Square = .017 Un-standardized Beta coefficient Un- standardiz ed Beta coefficient Un-standardized Beta coefficient Un- standardized Beta coefficient Un- standardized Beta coefficient Un- standardized Beta coefficient Un- standardized Beta coefficient Standard Error Standard Error Standard Error Standard Error Standard Error Standard Error Standard Error Putnam Raw 12.584 -36.896* -5.88E-005 .000 -.001 .003* 12.068 21.774 .000 .001 .002 .002 Olson Raw -11.338 51.203 -.001 -.002 .014** .002 37.026 66.804 .000 .002 .006 .005 Population 2000 -.004 .036** 6.072E-008 1.31E-007 -9.43E-007 -1.49E-006 .008 .014 .000 .000 .000 .000 Main Street -538.378 -3589.981** -.016 -.085 -.106 -.171 976.440 1761.734 .015 .056 .164 .128 IDA 2536.236 369.630 .020 .031 .286 .109 1961.462 3538.953 .030 .112 .334 .255 Voter Turnout 1050.163 1167.221 .237*** .487* -.710 -.222 4533.600 8179.714 .072 .260 .762 .589 Number of Organizations involved in ED -165.375 -185.619 -.002 -.003 -.020 -.007 146.115 263.628 .002 .008 .025 .019 Council /Manager 1164.375 397.911 .009 -.011 .035 -.079 992.784 1791.223 .016 .057 .167 .128 Transportation Access -378.078 -1084.615** -.001 -.003 -.004 .039 236.637 426.950 .004 .014 .040 .031 H.S. Diploma 50928.619*** 83820.652*** -.250*** -.364 -.606 -.426 5845.484 10546.672 .092 .335 .974 .748 Violent Crime .788 -2.068 2.22E-005 -7.13E-006 .000 .000* 1.613 2.910 .000 .000 .000 .000 Property Crime -.710*** -2.439*** -1.54E-005*** -1.40E-005 7.88E-005* -2.56E-006 .255 .461 .000 .000 .000 .000 Performance Standards 204.932 1396.072 .004 .012 -.096 -.109 500.952 903.839 .008 .029 .084 .067 GFOA Awards 189.746 877.408 .001 .111** -.363** -.182 894.760 1614.365 .014 .051 .151 .117 ED Programs -1082.875*** -2409.818** .002 .007 .058 -.039 322.141 581.221 .005 .018 .054 .042 Strategic Plans 20.135 -776.550 -.002 .012 .068 -.007 322.895 582.580 .005 .018 .054 .042 Tax Incentives 94.418 205.213 -.002 -.001 .019 .018 162.290 292.811 .003 .009 .027 .021