Telecommunication ; Federal Reserve District, 5th

Charles Gerena

English

Research Papers in Economics

6 Region Focus • Spring 2003
TRANSPORTATION PLANNING
Charlotte Tackles
Transit and Land
Use Together
C
HARLOTTE, N.C.—
The freedom and con-
venience of automobiles is
tough to beat, especially in
metropolitan areas where
multiple commercial and
residential centers are spread
out over long distances. Mass
transit can’t serve these areas as
efficiently because the popu-
lation is too dispersed.
Charlotte is hoping to
tackle this conundrum by
simultaneously planning
denser development and a
regional transit system. Work
should begin this year on the
first leg of the $3 billion
system, the most expensive
transportation project in the
works for North Carolina.
While sprawl will con-
tinue, the city’s integrated
transit and land-use plan will
encourage the creation of tra-
ditional neighborhoods where
home, work, and shopping are
just a train or bus ride away.
“[We want] to concentrate the
majority of future growth in
five major travel corridors;
create mixed-use, pedestrian-
friendly developments [along
the corridors]; and construct
a transit system to support
them,” describes Ronald
Tober, chief executive of the
Charlotte Area Transit System.
“It will take time [but] it will
be better from an environ-
mental standpoint by keeping
down the loss of trees and
farmland, as well as keeping
down vehicle miles traveled.”
John Silvia was skeptical
about this plan at first.
Silvia, chief economist at
Wachovia Corp., says Char-
lotte is fairly dense, but not
as dense as other cities with
transit systems like Chicago. 
Now,  he is more opti-
mistic about the success of
Charlotte’s transit system
because of its flexible imple-
mentation. In areas with
sparser development, like the
southeast corridor leading to
suburban Matthews, rapid-
transit buses will operate
along roadways separated
from traffic. In more devel-
oped areas, like the southern
route to the town of Pineville,
light rail with greater passen-
ger capacity is planned. 
Charlotte’s approach is
innovative, but will it relieve
congested highways? Accord-
ing to research by transporta-
tion consultant Wendell Cox,
new rail routes tend to draw
commuters away from bus
lines, not out of their cars.
Moreover, “Charlotte does
not have a strong bus rider-
ship base to feed light rail,”
Cox wrote in a recent report. 
Also, can mass transit
accelerate economic activity,
or does the activity have to
occur first? Silvia believes it
can happen either way, but a
train station or bus stop
doesn’t guarantee develop-
ment of the surrounding area.
He points to some stations in
Chicago where little has
changed and others that have
become bustling centers of
commerce. The key is having
other elements in place to
support growth, such as suf-
ficient land for development.
Of course, the commu-
nity must want more growth.
Pineville was supposed to
have a light-rail station
serving its downtown, but
local officials opposed it
because of their concerns
about traffic. A small town
can get overwhelmed by
people, notes Silvia.
—CHARLES GERENA
MEASURING HAPPINESS
How Happy 
Are You?
E
conomists have entered the
realm of happiness research,
asking such questions as how
do economic conditions and
legal institutions affect people’s
perceptions of well-being? The
results reveal a great deal about
economic behavior, says Carol
Graham, vice president and
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The Charlotte Area Transit
System will use a combina-
tion of rapid-transit buses,
streetcars, and light-rail
trains, depending on
population density.director of the Governance
Studies Program at the
Brookings Institution. “Things
like economic security, employ-
ment status, health, and marital
status are much more important
than the standard [economic]
models assume,” Graham notes. 
In a book published on
the subject in 2002, Graham
and co-author Stefano Pet-
tinato examine data from 17
Latin American countries
and from Russia. Among
other things, they find that
relative income differences
have important effects on
how people assess their
well-being, and that those
people in the middle or
lower middle of the income
distribution are more likely
to be dissatisfied than are
the very poorest groups. 
In a working paper called
“Does Happiness Pay?”
Graham and co-author
Maria Fitzpatrick investi-
gated panel data for 6,500
respondents in Russia from
1995 to 2000. The paper
found that “static variables
such as gender, stable
marital status, and educa-
tion levels are more likely to
have effects on normal hap-
piness levels, while changes
in socioeconomic or marital
status (particularly divorce)
are more likely to cause fluc-
tuations in happiness levels.”
What’s more, happiness and
positive expectations about
the future correlated posi-
tively with higher future
income, while low self-
esteem and negative per-
ceptions were linked to
smaller increases in income.
In  other happiness
research, economists have
found that in western indus-
trialized nations, average hap-
piness hasn’t kept pace with
rising per capita incomes, so
money may not buy happiness
after all. For example, in the
United States, per capita real
income increased 2.5 times
from 1946 to 1991, but happi-
ness, on average, remained
constant, according to estab-
lished findings. The same
thing happened in Japan,
according to several scholars.
In 1991, people in Japan made
six times the amount of
money they did in 1958, but
average life satisfaction
remained exactly the same as
it did in 1958. So what gives?
Economist Richard Easterlin
of the University of Southern
California published an article
in the Economic Journal in
2001 that shows that as people
earn more money, they want
more money. Easterlin says he
searches for patterns among
the data. “For the population
as  a whole, the pursuit of
income as a source of happi-
ness is illusory,” he says.  
Investigations into hap-
piness open “a whole new
way of thinking about eco-
nomic measures and
progress, based on one of
the oldest concepts in
history,” Graham says.
—BETTY JOYCE NASH
INDUSTRY CLUSTERS
Bringing Biometrics
to West Virginia
W
est Virginia has fostered
its high-tech industry
for years, especially in
communities along a 35-mile
stretch of Interstate 79 in the
north central portion of the
state. With the help of state
and federal officials, a growing
number of scientists in the
region are expanding the
frontiers of biometrics,
technologies that identify
individuals by their physical
and behavioral characteristics.
What will it take to translate
this research activity into
commercial activity and jobs? 
The global biometrics
market was worth around
$119 million in 2000. Ter-
rorism threats have acceler-
ated efforts to control
access to buildings and sen-
sitive information, leading
industry analysts to expect
the market to finally take
off. Until now, widespread
adoption of biometrics
technology — ranging from
retinal scanners to voice ver-
ification systems — has
been slow and the industry
has remained fragmented. 
Given the nature of the
biometrics industry, compa-
nies will need compelling
reasons to cluster in north
central West Virginia. Econ-
omist Michael Hicks at Mar-
shall University describes a
few economic factors that
generally lead to an agglom-
eration of industry. 
First, a region could have
attributes that make it
cheaper to produce a par-
ticular product or service,
such as easy access to
human capital and technol-
ogy. In the case of the bio-
metrics industry, Hicks says
that companies save money
by locating where there are
scientists and laborers who
work with electronics. 
The I-79 corridor has this
human capital. The FBI’s fin-
gerprint database is head-
quartered in Clarksburg, the
Department of Defense’s
Biometrics Fusion Center is
temporarily based in Bridge-
port, and West Virginia Uni-
versity has developed a
Center for Identification
Technology Research in
Morgantown. In addition,
the university teaches bio-
metrics as part of its foren-
sic science program.
Second, Hicks says com-
panies could be drawn to a
region where many people
need a particular product or
service. While locating fac-
tories near such a customer
base doesn’t always save
money, there are marketing
advantages to having a sales
or service office close by.
“It’s easier to give a call to a
local guy,” notes Hicks.
Consequently, biometrics
companies serving govern-
ment agencies in the mid-
Atlantic may establish a
presence in the region.
Ralph Bean Jr., chairman
of the I-79 Development
Council, believes the
region’s good quality of life
and its telecommunications
infrastructure should attract
biometrics firms. However,
West Virginia needs more
Spring 2003 • Region Focus 7
Biometric technologies like
this hand reader identify
individuals by their physical
characteristics.
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Y8 Region Focus • Spring 2003
venture capital to really get
the industry off the ground. 
So far, California-based
Ethentica by Security First
Corp. plans to move to Fair-
mont this year, and there are
rumors of other companies
considering a similar move.
Nonetheless, an agglomeration
of biometrics firms may be
years away from forming in a
state with a history of natural
resources-based industry. 
“Changing economic
forces is like moving the
Titanic,” says Hicks.
—CHARLES GERENA
BALTIMORE BOOSTS PAY
FOR SOME WORKERS
Living Wage Laws
A
cross the country, roughly
90 communities have
passed “living wage” laws. The
measures require companies that
do business with city or county
governments to pay their
workers more than the federal
minimum wage of $5.15 an hour.
The exact amount varies, but the
wage is supposed to be sufficient
to support a family of four at a
level above the federal poverty
line, according to the Association
of Community Organizations
for Reform Now (ACORN). In
some cases, the living wage has
been set as high as $12 an hour.
The living wage move-
ment is generally acknowl-
edged to have gotten its start
in Baltimore. In 1994, the city
passed a law requiring private
companies with city con-
tracts to pay their workers
$6.10 an hour. Over time,
that figure has risen and now
stands at $8.49.
The law was controversial
from the beginning. Many
people predicted that it would
harm Baltimore’s already strug-
gling economy and bust the
city’s budget. Others argued
that a living wage would reduce
government spending on
social-service programs aimed
at helping the poor.
Eight years later, the law
remains controversial. The
Employment Policies Insti-
tute, for instance, claims
that “contract costs did,
indeed, rise rather than fall
after the implementation of
Baltimore’s living wage leg-
islation.” But a report from
the Economic Policy Insti-
tute (EPI) says that the law
has helped “workers in Bal-
timore without significant
financial cost to the city.
Moreover, the evidence sug-
gests that higher wages and
hours improve the stability
and reliability of the work
force.” The EPI report con-
cedes, though, that the living
wage has aided only a small
group of workers and that
employer noncompliance
remains a serious problem.
David Neumark, an econ-
omist at Michigan State Uni-
versity, has tried to reconcile
such varying claims. In a
nationwide study of living
wage laws, Neumark argues
that the measures have had
modest success combating
poverty. The reason: since
coverage is limited to employ-
ees of city contractors, only a
tiny fraction of low-income
workers are affected. Instead,
the major benefits have
accrued to unionized munic-
ipal workers. By raising the
wages that private firms have
to  pay, Neumark writes,
“living wage laws may reduce
the incentives for cities to
contract out work that oth-
erwise would be done by
municipal employees, hence
increasing the bargaining
power of municipal unions
and leading to higher wages.”
According to ACORN, four
other Fifth District communi-
ties — Alexandria, Va., Char-
lottesville, Va., Durham, N.C.,
and Montgomery County, Md.
— have already passed living
wage laws. Richmond, Va., is
also considering doing so.
—AARON STEELMAN
TUITION COSTS CLIMB
But Enrollment Is
Still Up
S
tate budget cuts have
forced public colleges and
universities to raise tuition.
Nationally, tuition costs at
public colleges increased
almost 7 percent in the most
recent year, up from roughly 3
to 4 percent in previous years.
State schools in the Fifth
District likewise saw unprece-
dented tuition hikes. At West
Virginia University (WVU),
for instance, tuition increased
by 9.5 percent from the 2001
to  the 2002 academic year.
Statewide budget cuts, which
have hit higher education par-
ticularly hard, have forced “the
school to recoup some [of the
loss] by raising tuition,” says
Bill Nevin, external commu-
nications manager at WVU.
“Yet last fall, the school
enrolled 23,000, its highest
enrollment in several years.
And graduate enrollment
increased by 1.8 percent.”
In  January, the Board of
Regents of the University
System of Maryland approved
a mid-year 5 percent tuition
hike. “This is a cyclical
pattern, it has happened
before, it will happen again,”
says Laura Perna, assistant
professor of education policy
at the University of Maryland,
College Park. “The real danger
is that these tuition increases
are occurring at a time when
families are facing a lot of
other financial challenges
brought on by layoffs and
declines in their personal port-
folios. Just like the states, fam-
ilies are finding they also have
fewer financial resources.”
Despite the increases in
tuition, enrollment figures
at the Fifth District’s public
universities continue to rise.
Graduate enrollment, in par-
ticular, may be positively
affected by the sluggish
economy. The reason: unem-
ployed workers having a hard
time returning to the job
market may decide to go to
school to improve their skills.
—ELAINE MANDALERIS
Tuition at West Virginia
University increased by 9.5
percent from the 2001 to the
2002 academic year.
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Industry clusters : bringing biometrics to West Virginia

http://www.richmondfed.org/publications/research/region_focus/2003/spring/pdf/short_takes.pdf

Industry clusters : bringing biometrics to West Virginia

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