Explaining U.S. urban economic growth 2000–2004: The role of the creative class, social capital, economic freedom, distributive politics, and defense spending

The need to sustain economic growth and create jobs has dominated urban policy making in the United States for decades. Feeling pressure to meet this need, city and state governments have rushed to adapt economic policy concepts that have either been untested by researchers in the literature or that need an updated examination. This project explored the effects of Defense Spending, Social Capital, Creative Class Theory, “Economic Freedom,” and Distributive Politics on US cities' economic growth. This study investigated whether US cities' economic growth may be due to the substantial monetary infusion from Department of Defense Prime Contracts awarded in a 273 city sample from 2000-2004. It tested the cities' economic growth and their scores on Florida's (2002) Creative Class Index, Rupasingha et al's (2006) Social Capital Index, and Pacific Research Institutes' “Economic Freedom Index.” The performance of these newer theories was compared to the more established theory of Distributive Politics (Lowi 1964; Wilson 1973). Each city's amount of Defense Prime Contracts was tested for inequality distributions using Lorenz Curves and Gini Coefficients. Case studies on West Virginia and Kansas were conducted to investigate state economic policymaking. Economic growth was measured using the percent change from 2000 to 2004 in Total Employment and Total Personal Income for each city in the sample. The study found a highly significant and positive relationship for economic growth among cities with high Creative Class ratings and high Economic Freedom scores. Social capital, defense spending, and Distributive Politics variables had insignificant and/or negative relationships as explanatory variables for economic growth. Key Words: Economic Development, Economic Policy, Creative Class, Social Capital, Urban Politics, Distributive Politics, Defense Spending