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Methodology for the Northeast Ohio Dashboard

The Dashboard Indicators for the Northeast Ohio Economy is more than a monitoring tool. Unlike many other sets of indicators, it constructs a regional framework and provides statistical evidence on which factors matter in determining regions' growth rates. Not only does the regional framework provide the means to prioritize economic growth factors, it also offers a method to evaluate the initiatives discussed and implemented by the Fund's visioning and agenda-setting process.

The development of the regional framework sets apart the NEO Dashboard Indicators from other region's benchmarking efforts. Too often, indicators that are interesting and seemingly useful are assembled into a reporting system with the idea that the user can pick and choose. Such an approach ignores whether or not the indicators have a meaningful relationship with the underlying regional economy. The NEO Dashboard Indicators identify only those factors that are shown to be statistically related to regional economic growth and are critical for understanding and tracking the regional growth process.

Still, the development of the final Dashboard Indicators was a data-intensive process. The Dashboard Indicators are based upon statistical analyses of nearly 40 economic and social variables for metropolitan areas. The initial study segmented the analysis to include metropolitan areas with populations between 200,000 and 3 million. Due to data availability and the desire for a larger explanatory power of the statistical models, the 2007 update is based on a larger sample of metropolitan statistical areas (136 compared to 118). In addition, it uses the new definition of metropolitan areas boundaries that was adopted by the U.S. Office of Management and Budget in 2003. The new geographic boundaries identify more accurately the current regional labor markets and commuting patterns among counties included in each metropolitan area. The uniqueness of the Dashboard is that it boils down the nearly 40 variables into nine distinct growth factors.

The nine factors include:

Skilled Workforce and R&D describes the labor force quality affiliated with advanced research which includes variables approximating high educational attainments and occupational levels (graduate and bachelor's degrees and professional occupations), and describes the ability of a region to be engaged in technology-driven economic development based on industrial and university R&D and technology-related small business entrepreneurship.

Legacy of Place reflects the demographic, social, and economic history of metropolitan areas. It includes variables that may suggest older physical infrastructure including industrial and residential buildings (approximated by the percentage of houses built before 1940), industrial heritage (share of manufacturing employment), and racial and poverty concentrations in central cities (dissimilarity index and the core city's share of poverty relative to the core city's share of the metropolitan population). This factor is different from other eight in that it is a policy variable, which could be changed to improve future growth prospects. Rather, it is a reminder that many regional economies must overcome historical circumstances in order to return to a path of growth. It also offers a convenient way to select a group of metro areas that share similar legacies with one of the four NEO metro areas.

Urban Assimilation describes the assimilation of different ethnic groups and acknowledges a common variation of the high presence of this population in places with a strong share of minority-owned businesses and advanced information sector.

Racial Inclusion and Income Equality includes racial patterns (percentage of blacks and black isolation index) and to poverty and income inequality (percentage of children living in high-poverty neighborhoods and income inequality) along with violent crime rates.

Locational Amenities reflect the quality of life in a region and influence people's decisions about the places they want to live, work, and play. Even though the quality of life measures are highly subjective and people prioritize them differently, variables are included that reflect some universal priorities. These variables describe transportation infrastructure, arts and recreational amenities, and healthcare services.

Technology Commercialization includes venture capital per employee, number of patents per employee, and cost of living. This is one of the two new factors introduced during the update of the initial study. Successful production of innovation requires investments in research and development that can lead to the introduction of new products and more efficient processes of production.

Urban/Metro Structure Economic measures the core city's share of metropolitan poverty relative to its share of the metropolitan population, and it confirms the higher concentration of poverty in central cities. Cities that have a higher share of poverty relative to the general population are less able to cover the costs of poverty through its tax base.

Individual Entrepreneurship describes the small business sector of regional economies and includes two variables: percentage of self employed and the share of business establishments with less than 20 employees. This is the second new factor introduced since the initial study was completed and confirms researchers' projections for the increased role of small and personal businesses in the economy.

Business Dynamics is a measure of vitality of the region's business community which is calculated as the ratio between business openings and business closings of single-site companies. Metro areas with more business openings than closings have a healthier and more dynamic economy.

Download the full paper here.

See a detailed listing of the data sources.

Lessons and Conclusions

Several key lessons emerge from this analysis, which are important for developing a shared regional vision and agenda for Northeast Ohio.

  1. There is no silver bullet that will turn a slow-moving economy based on traditional industries into a vibrant, high-performance one.
  2. A skilled workforce and strong business dynamics are most highly correlated with regional economic growth.
  3. The pursuit of social goals, such as racial inclusion and income equality, can enhance regional economic growth.
  4. While positively related to per capita income growth, locational amenities are not as important to regional growth as the other factors included in the analysis.
  5. The region's growth is impeded by legacy costs, which are the result of an aging infrastructure and an unpopular climate.

Going forward, the NEO Dashboard of Regional Indicators will track these nine factors over time for each of the four NEO metro areas. In addition, the ranking of the four metro areas with respect to these factors and the four measures of regional growth will be updated annually to monitor the relative progress of the region.

The evidence-based approach used to construct the Dashboard yields regional economic indicators that local stakeholders can use to gain insights into how to structure an economic development agenda that focuses on issues that are directly related to growth. The indicators, by encompassing not only important economic factors but also societal values, allow the region's stakeholders to advance a highly focused regional economic development agenda that can lead to a long-term economic transformation, both in terms of promoting economic growth and in improving its civil society.