case study on economic growth and development

Making local economies prosperous and resilient: The case for a modern Economic Development Administration

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Amy liu , amy liu vice president - metropolitan policy program, adeline m. and alfred i. johnson chair in urban and metropolitan policy @amy_liuw brad mcdearman , brad mcdearman nonresident senior fellow - brookings metro xavier de souza briggs , xavier de souza briggs senior fellow - brookings metro @xavbriggs mark muro , mark muro senior fellow - brookings metro @markmuro1 anthony f. pipa , anthony f. pipa senior fellow - global economy and development , center for sustainable development @anthonypipa adie tomer , and adie tomer senior fellow - brookings metro @adietomer jennifer s. vey jennifer s. vey nonresident senior fellow - brookings metro @jvey1.

June 27, 2022

31 min read

Congress has recently shown serious interest in reauthorizing the Economic Development Administration (EDA), a Department of Commerce agency last authorized in 2004. Congressional appropriators will also have their turn in adequately resourcing the agency, following the extraordinary demands of the pandemic and other impacts to local economies over the past two years.

The urgency and importance of congressional attention cannot be overstated. America’s global economic standing is under threat as digital disruption, the race for talent, and widening inequality both within and across regions challenge the nation’s competitiveness. Meanwhile, the U.S. economy regularly confronts recessions, extreme weather events, supply chain breakdowns, and other shocks that disproportionately impact some local economies and further test the nation’s collective ability to adapt and maintain economic resilience over the long run.

In response, the country needs to marshal the economic assets that cluster in specialized ways across the regions that make up the U.S. economy—be they leading industries, research universities, entrepreneurs, or workers. These assets are critical if the nation hopes to, for instance, reduce its reliance on imports and boost supply chain resilience with greater homegrown capabilities in computer chip, renewable energy, and medical equipment design and production. Furthermore, regions with strong innovation, economic diversification, and civic capacities are more able to adapt and bounce back from economic disruptions. For these reasons, the federal government has a vested interest in spurring place-based regional economic development. To do that, it has the EDA—the one federal agency whose sole charge is to promote economic revitalization in communities of any scale, rural or urban, across the country. In short, the EDA’s role is essential if the U.S. is to compete globally and prosper locally.

The concern is that the EDA is not properly resourced or equipped to meet its vital mission and nationwide mandate. The agency is tasked to do too much with too little—its chronically small annual budget, combined with unpredictable special appropriations, positions the agency as marginal when, in fact, the opposite is true. The EDA is the nation’s indispensable agency for supporting economic growth and resilience for communities large and small, as their leaders respond regularly to new opportunities and threats. But the policy and budget process does not yet treat it accordingly.

Congress can do its part. It can use reauthorization, now decades overdue, to elevate and modernize the EDA. It can give the agency the tools and resources to match its mandate, so it can successfully help communities and the nation adapt and rise to the immense challenges of the 21st century economy, including the range of economic disruptions today and those to come. EDA reauthorization deserves bipartisan attention and action.

To inform this process, this brief provides a rationale and framework for EDA reauthorization. It is organized in three sections. First, it expands on the case for a federal role in regional economic development. It then shows why only the legislative process can better equip the EDA to improve America’s capacity to innovate, compete, and expand economic opportunity for more people in more places. The brief closes with how: We recommend that the EDA become a $4 billion agency with a sharper purpose and set of roles and capabilities that match that mission. We believe this framework for EDA reauthorization and future appropriations would set the agency and its community partners up for success in today’s—and tomorrow’s—economy.

The authors of this brief have worked for decades with local, state, tribal, and national leaders on economic development planning, strategies, and execution. We are attuned to the demands placed on economic development actors across urban and rural communities, small and large regions, tribal nations, and downtowns and Main Streets. We are familiar with the complexity of implementation in areas such as innovation, talent development, finance, community economic development, placemaking, infrastructure, and regional and environmental planning. We came together to test a simple proposition: That despite our diverse backgrounds and experiences in economic development, we could agree on the importance of making the EDA a high-performing federal partner in spurring innovation and economic renewal for every region of the country and a policy framework for how to make that happen.

The case for a federal role in regional economic development

There are several reasons the federal government needs to proactively engage and support place-based economic development.

First, the path to national economic success will not come from a top-down, one-size-fits-all solution. That’s because the U.S. is not one monolithic economy, but a network of regional economies. Each is anchored by metropolitan areas and surrounding micropolitan and rural areas with their own unique industry specializations, labor and housing markets, and institutional capacities and relationships. Public, private, educational, and civic partners in each region often come together to help their businesses, industries, and workers adapt to new economic challenges or opportunities. Some regions benefit from a robust civic infrastructure; others suffer from weakened civic capacity reflecting years of economic disinvestment, siloed mandates, and talent flight. In short, any federal approach to bottom-up economic growth and renewal must unleash regions’ varied assets and governing capabilities.

Second, while the economic geography of the U.S. has always been highly varied, what’s alarming is the extent to which it has become a winner-take-most economy from region to region. Since 2005, a handful of metropolitan areas have captured a predominant market share of the nation’s high-value innovation jobs, while hundreds of other communities lag behind. Indeed, the Organisation for Economic Co-operation and Development (OECD) finds that the average income gap between the most and least productive regions within wealthy nations grew an astonishing 60% over the past two decades.

This uneven economic landscape is a national problem, not simply a local one, as it concentrates the country’s competitive advantages in too few places while leaving large swaths of the U.S. underperforming their economic potential. There are twin costs to this extreme imbalance: Workers and industries in high-growth markets suffer from an unaffordable cost of living (especially high housing costs) and sharp inequality between communities within their regions, while other urban and rural regions struggle to generate income, wealth, and economic security. The result is that too few communities and regions are economically dynamic, prosperous, and inclusive.

A third reason for federal engagement is that in the wake of the pandemic, promising market forces are creating a valuable window to advance federal efforts to expand economic opportunity. While the aforementioned trends of regional divergence have largely continued since the onset of COVID-19, some cities and metro areas are beginning to grow tech jobs after years of job losses or stagnation. These places are buoyed by the movement of workers out of some of the largest metro areas and into smaller metro areas and rural towns, thanks to the flexibility of remote and hybrid work. Meanwhile, the future of work is reinventing downtowns, Main Streets, and other commercial corridors throughout regions. The geography of economic growth and opportunity is shifting, and rather than fuel more economic winners and losers from these dynamics, the federal government can use improved policies and investments to better enable leaders in every region, office, and commercial corridor to adapt and keep pace with the changing rules of the digital economy. In other words, the time is ripe to make wider and more resilient geographic prosperity a real possibility.

Lastly, the federal government is uniquely capable of making the scale of investments required to help local actors adapt to external forces—from natural disasters to technological shifts—and unleash the economic potential of places. Despite their best intentions, local interventions alone are inadequate to address economic shocks and the yawning gaps of growth and opportunity across the U.S. map. However, for now, the U.S. invests significantly less than other OECD member nations in helping its lagging regions adapt and develop. Our federal government also coordinates less consistently with subnational units of government—states, territories, tribes, and localities—on critical policymaking such as industry regulation, which can have far-reaching and disparate effects on different regional economies.

How changes in place-based economic development inform today’s federal support

To best understand the federal role, the federal government must first recognize how local economic development has changed and become even more resource- and capacity-intensive.

For decades, the primary focus of local economic development efforts has been to market their regions for business attraction, which was viewed as the most effective way to create jobs and grow a regional economy. Regions would provide the marketing and coordination, and states would provide incentives to secure the deal. Sometimes, the federal government would make public works or other infrastructure investments in regions to support the location and expansion of businesses—reinforcing the transactional, project-based nature of traditional economic development practice.

While incentives-driven business attraction remains one part of local economic development, numerous studies have found that it has not solved many of today’s local economic challenges. Rather, an increasing number of local leaders are going beyond measures of job growth to instead prioritize job quality, productivity, income growth, or other qualify-of-life measures, especially in smaller communities where job creation is not a realistic objective.

To achieve these broader aims, leaders are moving away from singularly focused transactions and toward more holistic, integrated approaches. This includes investments in strategic initiatives such as helping existing firms and industries grow, innovate, and develop diverse talent; creating an inclusive, homegrown entrepreneurship ecosystem; rebuilding Main Streets, downtowns, or other neighborhood corridors as flywheels for broader market-based growth and wealth creation; and centering talent and housing affordability in economic competitiveness and inclusion. Finally, both regional and community actors are investing in good governance by bringing local leaders and institutions together to solve problems and create the conditions in which workers, families, businesses, and other key partners are willing and able to stay and invest in the community.

As they do, local leaders are also increasingly mindful of ways to help vulnerable populations or protect the environment as sources of economic growth. For instance, local leaders are responding to the dislocating effects of disruptive technologies, especially to support Black, Latino or Hispanic, and other disadvantaged workers and entrepreneurs who are most vulnerable to automation and business closures in “high-risk” sectors such as food service, logistics, and retail. Regional leaders are aware of the costs of climate risk for businesses and communities and, conversely, the significant growth opportunities in building a low-carbon future.

Both large urban centers and rural areas are pursuing these broader approaches to economic development, despite the false urban-rural binary that permeates the political and policy discourse. In fact, rural leaders share similar challenges to their urban counterparts. For instance, rural communities are becoming more racially and economically diverse , while they grapple with educational quality, inadequate incomes for workers and their families, and challenges in health care access, cost, and outcomes. The extractive nature of many rural economies leaves too little wealth and economic decisionmaking to the communities themselves. Just like urban areas, rural towns have hidden assets and innovation ready to be leveraged but too often overlooked. And rural and urban regions are interdependent in ways that dated economic development paradigms and practices barely acknowledge, let alone build on.

That’s why economic development leaders from across the urban and rural continuum, such as in Indianapolis , Birmingham, Ala. , and Wytheville, Va. , have stepped up to create high-quality, entrepreneurial, and inclusive growth in their communities.

But this kind of inclusive economic development is hard work—and even pioneers in the field face many barriers to implementation . Local leaders typically lack the resources and organizational capacity to plan well, coordinate across actors, and respond to a patchwork of rural , tribal, and place-based programs alongside other state or philanthropic resources.

This reality prompted one of the authors of this brief to make the case for vigorous federal engagement to promote more centers of innovation and opportunity across the American landscape. Specifically, the report on growth centers from Brookings and the Information Technology and Innovation Foundation argues that absent robust federal action, few if any places (outside of the top U.S. metro areas) will be able to transform themselves into vibrant economies with self-sustaining innovation growth paths. The federal government is uniquely capable of investing at scale in targeted places to counter regional divergence and promote spillover benefits.

Another Brookings report makes the case that the most successful and promising cluster initiatives in the U.S. are industry-driven, university-fueled, and government-funded . In each of the cases in the report, significant government funding—from local, state, and federal sources—gave the initiatives early credibility and provided the scale required to have real impact. Without government investment, it is likely that none of the profiled initiatives, from Milwaukee’s water tech cluster to central New York’s unmanned aerial systems, would have even made it out of the starting gate.

Both reports reveal that public and private sector leaders in many U.S. regions have identified unique, high-potential opportunities, but also gaps in their local economies that are holding them back. They need adequate resources to grow and connect their economic and other assets in ways that can place them on a new economic trajectory.

The federal government has a critical and unique role in such place-based economic development. It can assess federal budgets, trade and regulatory proposals, and other policies for differential impacts on regions of the country based on their distinct economic realities, as the United Kingdom and other advanced economies do. In addition to the OECD analysis mentioned above, there is a compelling research base here in the U.S. to support such regional equity analyses in national policymaking. To cite one costly example, the U.S. could have approached airline industry deregulation differently if regional economic disparities and likely impacts had been considered rigorously and creatively. The federal government needs to build out and fully exercise this ability if it wants the U.S. to remain a world leader in innovation and become one in inclusive economic growth.

The EDA’s broad and under-resourced mandate

If place-based economic development is critical to our nation’s economic future, then the EDA is well positioned as the lead federal agency to fulfill that mandate. Though larger federal agencies provide grants, loans, and other supports for local development, the EDA is the agency tasked to: 1) work most directly with all types of regions across the country specifically on economic revitalization; and 2) bring rigorous economic analysis to help local regions make the most promising choices.

For these reasons, it is crucial that Congress reauthorize the EDA. More than that, Congress must use the process to elevate and modernize the agency. The dramatic shifts in the economy and economic development over the past several decades require the lead federal agency on economic development to be a meaningful partner to the regional entities that steward American competitiveness. And it should do so by reflecting the leading edge of practice in communities.

The EDA was established by the Public Works and Economic Development Act of 1965 to help industrial areas (urban), agricultural communities (rural), and mining towns deal with economic distress. For these reasons, the EDA’s most consistent and best-resourced mandate has been in public works projects and infrastructure development, as documented in a recently published overview of the EDA by the Urban Institute. That mandate reflects a classic—but now dated—understanding of the federal role in local economic development to promote large-scale, place-targeted capital investments in major public works, such as the Erie Canal and the many projects made possible through the Tennessee Valley Authority.

The EDA’s last reauthorization—in 2004—highlighted Congress’ understanding of the critical and evolving role of the federal government in place-based economic revitalization. The 2004 reforms recognized the need to expand the EDA’s mandate and mission to include promoting growth and competitiveness through better local economic planning; investments in economic innovation through university centers, new technologies, and broadband; brownfields remediation to prepare land for forward-looking, cluster-based development; assistance to respond to economic dislocation and adjustment triggered by growing global trade; and post-disaster assistance for economic recovery.

Unfortunately, that extensive mandate—meant to serve thousands of communities nationwide, on a fair and inclusive basis—has been supported with very modest congressional appropriations, averaging approximately $283 million annually since fiscal year 2011. To put that in perspective, the city of Alexandria, Va., home to 159,000 residents in 2020, approved an annual budget of $761.5 million that year. The EDA is forced to spread itself thin across its wide-ranging mandates and geographic remit, and it often lacks the funds to waive or reduce matching-fund requirements for smaller, poorer jurisdictions that most need help strengthening their economic and fiscal base.

The EDA’s budget is not only routinely inadequate—it is also unpredictable. For instance, in FY 2008, its budget more than doubled in absolute terms to reflect supplemental funding for Gulf Coast disaster recovery. In FY 2018, the agency was proposed for elimination due to arguments over government waste and redundancy. In stark contrast, in FY 2021, the agency received $1.5 billion through the CARES Act, followed by an additional $3 billion through the American Rescue Plan Act—10 times its typical annual appropriation over the past decade.

On the plus side, these one-time appropriations and supplemental programs have allowed the EDA to experiment with new economic development initiatives, such as the recent Build Back Better Regional Challenge grant program. But this seesaw has also left the agency with an impossible task of delivering an expansive mix of new and existing programs—from targeted public works projects in rural areas to broad regional innovation grants to economic adjustment assistance for coal communities—all on a miniscule and unpredictable annual budget.

In sum, the EDA enters reauthorization as an under-resourced agency. It is tasked to do too much with too little, employing a mix of new and outdated programs. It is time for Congress to reach the same awareness of needed change as it did in 2004 and reauthorize and modernize the EDA once again.

The proposal: A framework for modernizing the EDA

Reforming a federal agency through the legislative process is often hard, if not impossible, as competition between interest groups and agendas can produce a something-for-everyone patchwork and only incremental change. Fortunately, a group of national economic development groups and associations has unified to support EDA reauthorization. This EDA Stakeholder Coalition, which features diverse local membership representing all parts of the country, issued a statement for congressional leaders that includes nine shared priorities for the agency. There are many strong, tested programmatic ideas among the list that we reinforce below.

However, our proposal addresses two first-order questions: What specific roles and functions are most important for the EDA now, given the changing context for its work and the range of places its tools must target? And in what ways should the EDA organize itself to deliver on those functions effectively? To answer these, we offer an organizing framework for legislators to consider so the EDA is equipped with the proper purpose, roles, and capabilities.

The roles of a modern EDA

The EDA has a laudable, aspirational mission. From its website :

Mission: To lead the federal economic development agenda by promoting innovation and competitiveness, preparing American regions for growth and success in the worldwide economy.

The U.S. Economic Development Administration’s investment policy is designed to establish a foundation for sustainable job growth and the building of durable regional economies throughout the United States. This foundation builds upon two key economic drivers — innovation and regional collaboration. Innovation is key to global competitiveness, new and better jobs, a resilient economy, and the attainment of national economic goals. Regional collaboration is essential for economic recovery because regions are the centers of competition in the new global economy and those that work together to leverage resources and use their strengths to overcome weaknesses will fare better than those that do not. EDA encourages its partners around the country to develop initiatives that advance new ideas and creative approaches to address rapidly evolving economic conditions.

Unfortunately, the EDA is not currently structured or resourced to effectively carry out a mission of innovation and competitiveness across the nation’s wide range of regional economies. So let’s clarify the roles and core competencies the EDA must have to meet its mission.

To start, targeting and tailoring are crucial. The EDA’s overarching objective—given its place-based mission—is to unleash the latent economic potential in U.S. regions. To sharpen this purpose, the EDA must recognize that it demands expertise in both innovation and renewal. The former helps larger regions stay on the leading edge of discovery, development, and dynamism. The latter helps economically distressed places of all sizes stabilize or revitalize, putting them on the path to inclusive growth, a better business environment, and a better quality of life for residents. The paths to innovation and renewal have different starting points and, ultimately, different outcomes. They require different strategies, tools, and resources, and their programs are deployed at different scales, such as a region versus a Main Street.

So then, what functions does the EDA require? To successfully unleash regions’ latent economic potential, the EDA must play four essential roles: thought leader, resource provider, capacity builder, and coordinator of federal support for local economic development. These roles complement the key roles of state, local, and public and private sector actors.

Thought leader: The EDA should be the intellectual home for regional economic analysis and state-of-the-art economic development policy and practice in the U.S. This will inform and guide its own work and expand the sharing of best practices and new ideas across local markets; both are critical to driving better outcomes.
Resource provider: The EDA should provide large, flexible funding in the form of regular challenge grants to urban and rural regions, so leaders can pursue comprehensive approaches to economic transformation. This is true not just for high-growth regional markets but smaller rural communities as well.
Capacity builder: The EDA can use its expertise and targeted assistance to build the capacity of local and regional intermediaries to plan and implement effective economic development strategies and use federal and state resources more effectively. Such intermediaries play a vital role in strengthening critical assets and aligning actors, and this EDA role helps them access the training and resources they need.
Federal coordinator: The EDA can serve as the convener agency working with multiple federal agencies to coordinate, align, or help administer cross-agency federal responses to regional innovation and renewal. Doing so would optimize the use of limited government funding. This function is well precedented in existing law and agency practice, but it needs to be affirmed by Congress and consistently supported by the executive branch.

Funding and the signature activities to fulfill the EDA’s roles

Today, the EDA’s programs are primarily organized around the following specialized investment areas: public works, infrastructure, and facilities; research and technical assistance; economic adjustment grants and disaster recovery; innovation and entrepreneurship; economic development planning; and trade adjustment assistance and consultant services for firms. Together, these wide-ranging programs have been funded at just $283 million per year on average. Through reauthorization, the EDA should emerge as a financially robust agency, with its suite of existing programs anchored by signature initiatives supporting the four key roles described above.

To start, the EDA ought to operate with a dependable annual budget of at least $4 billion, which is commensurate with its vital mission and nationwide mandate. The agency received a $3 billion appropriation in the American Rescue Plan Act—a level we believe should be maintained given widespread demand for the new programs these resources were able to deliver. This would provide the EDA with the consistent scale of resources required to have real impact on local economies, and enable the agency to recruit, train, and retain the staff needed at both headquarters and regional offices to carry out its essential roles. This would also give the EDA the budget space to waive or reduce matching-fund requirements for the jurisdictions that most need help strengthening their economic and fiscal base. An investment of $4 billion in the EDA would match that of its popular complement, the Community Development Block Grant; the Biden administration’s FY 2023 budget request for that program is $3.8 billion.

With those resources, the EDA could implement a set of signature activities that advance the four roles of a modern, place-focused economic development agency. An inventory of existing EDA programs demonstrates critical gaps and the opportunity to prioritize broader, more flexible offerings over narrow, categorical ones that tackle the spectrum of local interests in innovation and renewal. This structure would also allow the EDA to move beyond organizing tactically with a large number of independent programs to organizing strategically around clear national priorities that empower local communities to achieve measurable outcomes (for example, a more competitive and resilient domestic manufacturing base). Most existing programs, and the recommendations of the EDA Stakeholder Coalition, align with those functions. Below are the signature initiatives that could deliver coherently on those functions to ensure a measurable return on the taxpayer’s larger investment in the agency:

Thought leader: Issue a regular report on the economic health and challenges of U.S. regions and serve as a clearinghouse of state-of-the art strategies.

Given its mandate and resources, the EDA can and should be the go-to resource on the nation’s economic geography, thanks to its on-the-ground knowledge from regional field offices, its expertise in industry clusters, and its access to critical statistical agencies such as the Bureau of Economic Analysis and the Census Bureau, also housed in the Department of Commerce.

To anchor this work, every four years, the EDA should produce a signature “State of U.S. Regions” report connecting national competitiveness, economic security, and broad-based geographic opportunity. This report would support improved federal decisionmaking and strategy, build awareness of new ideas across U.S. regions (and the globe), and monitor progress with innovative new initiatives. Additional reporting could address, for example, the health of the labor market, industry clusters, entrepreneurship, and wealth creation by race, gender, and region. This would give local and national leaders a picture of changing market conditions and how national place-based policies can solve problems or facilitate emerging competitive advantages in key sectors in different parts of the country. T hrough this process , the EDA could develop a unified definition of “economic distress” to guide programs that are aimed at supporting distressed places across all federal agencies. Further, the EDA could provide case studies of emerging practices, such as how economic developers are addressing talent needs, how-to guides informed by the work of pioneering intermediaries in the field, and workshops and conferences in which leaders can learn from one another. In this regard, the EDA would be mimicking and aligning itself with leading economic development entities that have strong market research teams—not solely for branding and marketing campaigns, but for helping leaders and partners make well-informed decisions and strategies.

In short, to be an expert on how economic development can best address innovation and renewal, the EDA must have robust in-house staff capacity and expertise of its own, at headquarters and in the field offices, so it can bring that collective knowledge to the field.

Resource provider: Make permanent the provision of large-scale, flexible challenge grants to boost innovation and competitiveness.

A core function of the EDA should be to manage a rotating set of large-scale competitive challenge grant programs to make flexible, transformative funding available to U.S. regions for pursuing promising innovations and strategies.

The key is to enable the EDA to routinely administer high-demand “big bet” competitions, which have thus far been operated only from one-time supplemental appropriations, as outlined above. This proposal highlights the importance of scale (high-dollar, flexible challenge grants) in driving real, tangible change across regions. As the aforementioned research on growth centers shows, it is critical to help midsized metro areas with high potential for success plug into the innovation economy’s tendency to concentrate in particular places with a critical density of assets. These competitive grants should also reward key outcomes that go beyond traditional job creation metrics. With its thought leadership function, the EDA can then capture lessons and evaluations from innovative practices and share them with other regions to inspire more evidence-driven strategies . Meanwhile, the EDA could support components of non-winning grant applications with existing, targeted EDA programs—for example, in public works or university innovation.

To that end, the $3 billion for the EDA in the American Rescue Plan Act is a model approach. The funding enabled the agency to design and announce a set of grant competitions to meet nationally significant economic recovery priorities, including tech-enabled industry growth, a skilled workforce, travel and tourism, and prosperous Indigenous and coal communities. What’s notable here is that competitive grants can be deployed to support innovation and renewal across large regions as well as smaller urban and rural communities. That approach to allocating resources is inclusive, targeted, tailored, and intensive enough in each economic region to make a meaningful difference.

Within that $3 billion package, the $1 billion Build Back Better Regional Challenge grant program demonstrates the promise of scale and flexibility in promoting global competitiveness. The funding—focused on a planning grant round and then implementation grants of $50 million to $100 million in selected regions—sufficiently empowers local leaders to implement smart, holistic regional cluster initiatives that create lasting economic competitiveness. It is flexible in that it rewards a suite of initiatives identified by multisector leaders (e.g., applied research, workforce training, entrepreneurship, community development) that create the conditions for industry clusters to succeed. What’s more, the program articulates clear and meaningful outcomes such as long-run industry competitiveness, quality jobs, racial and economic equity, and bridging urban and rural divides. As one of our local partners shared, “These targeted investments to fill [key intervention] gaps is one capability that EDA has that maybe no one else does. If this is the direction the EDA is going, then bravo.”

Future EDA challenge grant programs could reward transformative initiatives that connect urban and rural economies through supply chains and other linkages (a core insight from development economists worldwide ); or address specific areas of innovation needs as surfaced by EDA regional clusters research ; or that leverage anchor institutions such as regional public universities to spearhead economic development in distressed places. . The main point is that categorical, capital-intensive project funding will not yield projects that accelerate or reinvent a region’s economic trajectory. Regions need well-resourced challenge grants like Build Back Better to become the norm, because that is what it takes to generate impact.

State and regional stakeholders agree. The EDA received over 500 applications for the Build Back Better Regional Challenge from all 50 states and five territories, for just 60 planning grants and even fewer implementation grants. That’s an indication of the hunger for large-scale economic growth programs and of what’s right about this program’s design.

Capacity builder: Strengthen the capacity of local and regional intermediaries so they can effectively take on efforts related to both innovation and renewal .

The EDA should have a set of capacity-building programs that meet the needs of large regions and lagging communities. On the former, large metro areas ought not be dismissed as “high-capacity” places that can take care of themselves, when the reality is that organizing cross-sector, multijurisdictional regional competitiveness strategies toward greater equity and inclusion is complex, labor-intensive work. Meanwhile, many rural Main Streets, small towns, and urban corridors do not have the institutions or capacity to plan, design, or kick-start new initiatives to reverse or stem economic distress. In short, the EDA should adopt a flexible, locally responsive approach to capacity building that reflects the continuum of challenges across communities.

To do this, Congress could equip the EDA to administer two broad sets of capacity-building programs.

First, the EDA could offer grants to local, regional, and national intermediaries with the goal of increasing the capacity of local and regional entities to plan, develop, implement, and manage multisector economic revitalization strategies. This includes direct investment in organizations to hire and train staff and use market research. It also includes enabling smaller communities to participate and link up to regional strategies; this could prioritize giving lagging local economies the capacity to compete for large-scale funding, such as the challenge grants described above. Furthermore, via its thought leadership role, the EDA could provide or co-sponsor seminars and training programs for economic development professionals on the latest trends and practices. In short, to move regions out of distress, the EDA should invest in the capability of “backbone” organizations and other implementers to collectively execute high-quality visions and strategies that endure and adapt over time.

Second, the EDA should administer an efficient national corps of deployable talent—for example, a “fellows” program that places qualified economic development professionals in local and regional organizations. These fellows could help local organizations develop regional planning strategies, organize civic planning processes in preparation for competitive grants, put together competitive grant applications, and design and execute key initiatives.

Federal coordinator: Formalize the EDA’s capacity to coordinate with other federal agencies to ensure federal investment in local economies is cohesive and maximizes benefits.

Federal programs are too often siloed, burdensome to access and use, and not responsive enough to the varied economic conditions and institutional capacities at the local level. There are two ways in which Congress should empower the EDA to be a more effective coordinator of federal support for local economic development.

The first way involves formally elevating the EDA’s role to bring greater coherence to interagency federal place-based economic development when appropriate. This is not a new role for the EDA, given its interagency collaboration on disaster recovery and manufacturing communities . This might include elevating the EDA head from an assistant secretary to an under secretary within Commerce, so its leadership is on par with that of the International Trade Administration or National Institute of Standards and Technology, and more able to convene other cabinet-level agencies. Congress could formally establish and resource the EDA’s small Economic Development Integration office to further the agency’s capacity to coordinate federal programs in its headquarters and field offices. Congress could also expand the EDA’s role as coordinator to include serving as a delivery partner with other agencies eager to benefit from its place-based economic expertise.

Second, Congress could support an EDA planning coordination program to maximize the alignment of federally mandated regional plans, so that required objectives actually map toward achieving coordinated, desired outcomes in communities. Currently, at least three other federal agencies—Housing and Urban Development (HUD), Labor, and Transportation—plus the EDA require regions to produce detailed long-range or consolidated plans. It is commendable that the EDA has worked with other agencies on cross-agency recognition of these plans (e.g., a consolidated plan submitted to HUD can count for the EDA’s program requirements, and vice-versa). However, there is little coordination between the processes driven by multiple agency requirements, resulting in regional plans that often operate on parallel but disconnected tracks, sometimes with contradictory or competing priorities. Yet leaders on the ground know that effective, inclusive regional economic development requires that workforce, housing, land use, and transportation goals and investments work in concert. Grants for this EDA coordination program would increase the capacity of EDA staff and regional entities to regularly convene regional actors, coordinate with the public, align goals and investments, and revise formal plans accordingly. The EDA, HUD, the Environmental Protection Agency, the Department of Transportation, and the Government Accountability Office have all affirmed the need to better coordinate federally funded regional and local planning efforts to ensure federal investments are more strategic, aligned, and effective. Not surprisingly, some of the most promising cross-agency work currently underway is both targeted and outcome driven—for example, seeking to accelerate economic innovation, diversification, and the creation of good jobs in coal and power plant communities.

Beyond these four key roles, the EDA could employ some core principles to inform the design and implementation of its programs, policies, and partnerships. This is what the agency, at its best, already strives to be: flexible , to best meet the unique needs of different communities and regions; locally led , to increase the probability of success and better ensure it avoids favoring some communities over others; equitable and sustainable , to demonstrate that embracing diversity, equity, inclusion, and climate resilience is key to unleashing economic opportunity and boosting U.S. competitiveness; and outcome-driven , to reward local and regional initiatives that identify clear outcomes and measures to gauge progress on those outcomes.

Conclusion

As the U.S. confronts a range of economic shocks and intense global competition for leadership in innovation and economic growth, it is vital that policymakers remember that the nation’s competitiveness depends on the capacities of regions, both urban and rural, to innovate, prosper, and become more economically resilient.

Today, America’s competitive advantages are concentrated in too few places. But there is a way to unleash the economic promise of more places, expand opportunity at home and competitiveness broadly, and make the economy work for all regions and all groups of people. With the EDA, the federal government has an indispensable agency whose sole mission is to revitalize local economies. But for now, the agency is tasked to do too much with too little, with a remit to renew distressed regions and accelerate innovation in others. Doing both effectively is crucial, and it is possible with the right support.

For these reasons, the EDA’s reauthorization and future budget appropriations must go beyond the status quo in order to modernize and equip the agency to do transformative work.

Brookings Metro Global Economy and Development

Center for Sustainable Development

Glencora Haskins, Mayu Takeuchi, Julia Bauer, Patrick Rochford

March 15, 2024

Jenny Schuetz, Eve Devens

March 4, 2024

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Case Studies in Economic Development Third Edition

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Babar Chohan

Social Studies. The views stated therein are those of the author and not necessarily those

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Anyone who undertakes to produce a volume of surveys in economic development must confront the question: does the world really need another one? There have been four volumes in the present series alone, going back to 1988 (Chenery and Srinivasan, eds.), with the latest collection published in 2008 (Schultz and Strauss, eds.). The field changes over time and, one hopes, knowledge accumulates. So one motive is the desire to cover the more recent advances. And indeed, economic development has been one of the most dynamic and innovative fields within economics in recent years. But we had another motive as well. We envisaged this Handbook to have a somewhat different focus from earlier ones. In particular, rather than just surveying the " state of the literature " in various subfields, what we sought to accomplish is to present critical and analytical surveys of what we know (and don't know) in different policy areas. We asked the authors of each chapter to answer the questions: " What kind of policy guidance does the literature offer in this particular area of development? Where are the gaps? What can we say with certainty that we know? What are the weaknesses of the literature from a policy perspective? What kind of research do we need to undertake to answer burning policy questions of the day? To what extent does actual policy practice correspond to the prescriptions that follow from solid research? " We thus envisioned that the audience for this volume would not only be graduate students and other

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Author(s): Basurto, Maria Pia | Advisor(s): Robinson, Jonathan | Abstract: This dissertation consists of three self-contained chapters on development economics. The dissertation is focused primarily on one of the largest input subsidy program in the world in terms of how beneficiaries are whether households hide income. As a separate project, I also look at the impact of star students on their siblings test scores in the context of a Peruvian high-achievers national boarding school. In the first chapter, entitled “Measuring Sensitive Questions: Income Hiding and Subsidy Allocation ”, I document the extent to which villagers hide income from local leaders and other villagers as a strategic behavior in the context of a large scale agricultural subsidy in Malawi (FISP). My main contribution is methodological. I use three different measures of income hiding to asses the extent of this practice: direct questions, list randomization, and, willingness to pay to hide income. I find that inc...

Sustainable, inclusive housing growth: A case study on Columbus, Ohio

Over the past two decades, the Columbus region has enjoyed outsize population and economic growth compared with leading peer cities and the US average. 1 In this article, “Columbus” refers to the Columbus metropolitan statistical area unless otherwise specified. See “Ohio Metropolitan Statistical Areas (MSAs),” Ohio Department of Job and Family Services, Office of Workforce Development, accessed June 22, 2023. Yet growth has come at a cost—specifically by outpacing the region’s supply of available housing. Home and rental prices have soared as stock has been depleted, making homeownership—and sometimes even having a roof over one’s head—increasingly out of reach for many people, particularly those from historically marginalized communities.

About the authors

This article is a collaborative effort by Brandon Carrus , Seth Myers , Brian Parro, Duwain Pinder , and Ben Safran, representing views from McKinsey’s Social Sector Practice.

In just this past decade, the increase in housing prices and rents has dramatically outpaced household income. Additionally, the region’s population of people experiencing homelessness (PEH) has grown faster than those of its US peers in recent years. The region’s challenges have a disproportionate impact on historically marginalized populations (such as Black and Hispanic residents), who have a dramatically lower likelihood of being a homeowner and a much higher likelihood of experiencing homelessness. Amid ongoing rapid growth, the need for affordable housing and support services for PEH will only continue to increase unless significant action is taken. 2 HUD defines affordable housing as “housing on which the occupant is paying no more than 30 percent of gross income for housing costs, including utilities.” See “Glossary of terms to affordable housing,” HUD, accessed June 22, 2023.

Columbus is a microcosm of the United States’ housing insecurity plight. While many major cities are receiving national press coverage for this issue, housing insecurity is a humanitarian challenge facing communities of all sizes across the country. The National Association for Home Builders estimates that about 70 percent of US households cannot afford a new home at the national median price. 3 NAHBNow , “Nearly 7 out of 10 households can’t afford a new median-priced home,” blog entry by National Association of Home Builders, February 15, 2022. In 2022, US home vacancy rates were at their lowest levels since 1987, 4 “Home vacancy rate for the United States,” US Census Bureau, retrieved from Federal Reserve Bank of St. Louis (FRED) June 22, 2023. and the country is estimated to have a shortage of 6.5 million housing units. 5 Anna Bahney, “The US housing market is short 6.5 million homes,” CNN, March 8, 2023. Renters are also facing increased pressure nationally: 23 percent spend at least half of their income on housing costs, 6 Katherine Schaeffer, “Key facts about housing affordability in the U.S.,” Pew Research Center, March 23, 2022. rendering them “severely rent burdened” as defined by the US Department of Housing and Urban Development (HUD). 7 “Rental burdens: Rethinking affordability measures,” PD&R Edge, accessed June 22, 2023.

As in many regions in the United States, the primary contributors to the housing shortage in Columbus are embedded within deeply vexing economic and social issues, including stagnating incomes, racial gaps in homeownership, and access to financing and services.

As Columbus charts a growth strategy for the decades ahead, addressing housing and homelessness will be an essential component in realizing the goal of prosperity for all. Today, Columbus is projected to have a shortage of as much as 110,000 housing units by 2032. 8 Vogt Strategic Insights, “Analysis of housing need for the Columbus region,” Building Industry Association of Central Ohio, August 30, 2022. Without an increase in the supply of housing, Columbus may struggle to continue on a growth trajectory. Specifically, we have identified four priority interventions designed to work in concert to increase housing stock, keep rents affordable, and help more people, including historically marginalized populations, access the housing market:

Tap into existing housing capacity potential. Public–private collaboration on policies can identify land available for housing either as underused property or as part of broader rezoning efforts to increase the supply of homes, which is a requirement for sustained economic growth.
Reduce the cost of new construction. Promising cost-reduction opportunities include simplifying the permit process and engaging builders with expertise in cost-effective construction methods.
Support homebuyers and renters. Local government and policy makers can expand resources and consider policies that support public- and private-sector initiatives to improve homeownership rates, assist with rental affordability, and reduce the risk of homelessness.
Prioritize tackling homelessness. Alleviating homelessness requires increasing awareness of currently available resources for PEH and expanding relief funds to assist residents with affordable housing, healthcare support, training for employment, and other resources critical to reducing homelessness.

Many local leaders are well aware of the challenges that can result from booming growth. The policy-neutral research presented in this article is intended to complement the work already under way by leaders in the city of Columbus and surrounding areas to inform decision making about the housing shortage, affordable housing, and homelessness. 9 For example, see Bonnie Meibers, “Columbus details plan to build, preserve and invest in inclusive affordable housing,” Columbus Business First , June 27, 2022; Bonnie Meibers, “Columbus City Council announces 12-part plan to combat affordable housing shortage,” Columbus Business First , March 16, 2023; Bonnie Meibers, “The Punch List: Columbus lays out new solutions to housing crisis,” Columbus Business First , October 24, 2022; Mark Ferenchik, “Worthington considering asking for $1.1M affordable housing bond issue on November ballot,” Columbus Dispatch , January 16, 2023. In the process, we believe the Columbus region’s approach to housing could both build on and inform the economic development strategies of other regions across the country—with successes offering a potential blueprint for progress.

The fastest-growing region in the Midwest

From 2000 to 2021, the Columbus Region’s population increased by a third, adding more than 500,000 people and becoming the fastest-growing metropolitan statistical area (MSA) in the Midwest. 10 “Resident population in Columbus, OH (MSA) [COLPOP],” US Census Bureau, retrieved from FRED April 7, 2023. Includes MSAs with populations greater than one million. Midwest defined as Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Ohio, Nebraska, North Dakota, South Dakota, and Wisconsin. See “Resident population in Columbus,” retrieved April 7, 2023; Factbook 2020 , City of Columbus, accessed June 22, 2023. In September 2022, Columbus was named the fifth-hottest housing market in the United States, driven by the speed of home sales and demand. 11 “CAGDP1 County and MSA gross domestic product (GDP) summary,” US Bureau of Economic Analysis, accessed May 12, 2023; “Table 1.1.6. Real Gross Domestic Product, Chained Dollars,” US Bureau of Economic Analysis, accessed May 12, 2023.

This growth was precipitated by, and continues to benefit from, the region’s mounting economic strength: from 2008 through 2021, Columbus outpaced national GDP growth by almost ten percentage points. 12 “Total gross domestic product for Columbus, OH (MSA) [NGMP18140],” US Bureau of Economic Analysis, retrieved from FRED June 23, 2023; “Gross domestic product [GDP],” US Bureau of Economic Analysis, retrieved from FRED June 23, 2023. Growth has also been bolstered by more-recent major commercial investments from a range of industries, including semiconductors, financial services, and biopharmaceuticals. 13 “Intel breaks ground in Ohio,” JobsOhio, accessed June 22, 2023; “Project announcements,” One Columbus, accessed June 22, 2023; “Western Alliance Bank expands into the Columbus Region, creating 150 new jobs at new technology hub,” One Columbus, January 9, 2023; “Discover plans to open a customer care center in Whitehall to bring high-quality jobs and enhance equity in the Columbus Region,” One Columbus, November 18, 2022.

Growing pains: Coping with rapid growth

The population influx has measurably strained Columbus’s residential real estate and rental markets, particularly for people of color. Increasing housing supply is a critical enabler for the region’s continued growth trajectory.

Increasing housing supply is a critical enabler for the region’s continued growth trajectory.

Rapidly rising home prices. Although the region remains relatively affordable compared with leading peers, home prices have skyrocketed in relation to incomes. Data from Zillow reveal that roughly a decade ago, the growth of median household incomes in Columbus and the value of the city’s “lower tier” housing stock began to diverge (Exhibit 1). In the ten years since then, lower-tier housing prices within the city’s boundaries increased at 1.9 times the growth of median household income—an unsustainable divergence. 14 Zillow Home Value Index (ZHVI) All Homes - Bottom Tier Time Series, accessed April 19, 2023. A cavalry in the form of new-housing construction may be slow to arrive: from 2004 to 2022, annual construction of new single-family homes in Columbus fell by 34 percent, and it has yet to return to pre-2004 levels. 15 “B19013 Median household income in the past 12 months,” ACS 5-Year Estimates 2016–21, American Community Survey, US Census Bureau. In fact, for every 100 net new jobs in the region, only 65 new housing permits were issued. 16 Analysis of housing need for the Columbus region , Vogt Strategic Insights, August 30, 2022.

Rent increases outpacing wage increases. Renters in Columbus have also seen a price surge.

Rent prices in Columbus increased by about 35 percent between December 2016 and December 2021, exceeding median household income growth in that period by 11 percentage points (Exhibit 2). As a result, by 2021, approximately 40 percent of renters in Columbus were spending more than 30 percent of their income on rent, meeting HUD’s definition of “rent burdened.” 17 “Gross rent as a percentage of household income,” 2021: ACS 5-Year Estimates, American Community Survey, US Census Bureau. And renters account for a significant percentage of residents: as of 2021, nearly 40 percent of total households in the metro area were rentals, which is comparable to other fast-growing US regions such as Austin (around 41 percent) and Miami (about 40 percent) but much higher than similar sized regions such as Pittsburgh (around 29 percent) and Indianapolis (about 32 percent). 18 “B25008 Total population in occupied housing units by tenure,” 2021: ACS 1-Year Estimates, American Community Survey, US Census Bureau.

More people experiencing homelessness.

Columbus outpaced its US peers in the growth of its PEH population from 2008 through 2022 (Exhibit 3), and early reports indicate homelessness was up 22 percent in January 2023 compared with January 2022. 19 “Columbus region leaders introduce new action on homelessness: Funding for programs and services introduced as data shows increase in homeless count,” Community Shelter Board, June 6, 2023. McKinsey research on homelessness in the Bay Area indicates that homelessness is a result of a range of disparate triggers, including economic issues (such as job loss, raised rent, or foreclosure), health factors (such as substance abuse or mental illness), and social factors (for example, incarceration or domestic violence). 20 For more, see “ The ongoing crisis of homelessness in the Bay Area: What’s working, what’s not ,” McKinsey, March 23, 2023. A brief but significant drop in the number of PEH in Columbus in 2021 is likely attributable to additional support during the pandemic (for example, eviction moratoriums and stimulus payments). Still, as of 2022, Columbus had the fastest-growing PEH population among its peers.

Columbus outpaced its US peers in the growth of its PEH population from 2008 through 2022, and early reports indicate homelessness was up 22 percent in January 2023 compared with January 2022.

Disproportionate effect on historically marginalized communities. The racial disparities that plague many leading US regions are also starkly apparent in Columbus. Some historically marginalized groups are less likely to be homeowners: one-third of the region’s Black households own their homes, compared with more than two-thirds of White households (Exhibit 4). Black household incomes in the region are also about 42 percent lower than those of White households. 21 “S1903 Median income in the past 12 months (in 2021 inflation-adjusted dollars),” 2021: ACS 1-Year Estimates, American Community Survey, US Census Bureau.

In addition, Black residents account for 16 percent of Columbus’s general population but 60 percent of the homeless population. 22 “DP05 ACS demographic and housing estimates,” 2021: ACS 5-Year Estimates Data Profiles, American Community Survey, US Census Bureau; “PIT and HIC data since 2007,” HUD Exchange, February 2023. And even when people in these communities have housing, Black households are almost five times more likely to be overcrowded (more than one occupant per room) than White households. 23 “B25014B Occupants per room (Black or African American alone householder),” 2021: ACS 5-Year Estimates, American Community Survey, US Census Bureau; “B25014A Occupants per room (White alone householder),” 2021: ACS 5-Year Estimates, American Community Survey, US Census Bureau. These disparate experiences in different communities are reflected in other metrics of financial and housing stability, including income and the ability to pass on generational wealth. 24 “B19013B Median household income in the past 12 months (in 2021 inflation-adjusted dollars) (Black or African American alone householder),” 2021: ACS 5-Year Estimates, American Community Survey, US Census Bureau; “B19013A Median household income in the past 12 months (in 2021 inflation-adjusted dollars) (White alone householder),” 2021: ACS 5-Year Estimates, American Community Survey, US Census Bureau; Jung Hyun Choi, Laurie Goodman, and Jun Zhu, Intergenerational homeownership: The impact of parental homeownership and wealth on young adults’ tenure choices , Urban Institute, October 2018.

These disproportionate effects have wide-ranging impact, including on overall economic growth. PolicyLink and the USC Equity Research Institute estimate that the racial gap in Columbus is costing the region’s economy $10 billion annually. 25 Erica Thompson and Mark Williams, “Racial inequities costs Columbus economy $10 billion a year, report finds,” Columbus Dispatch , updated May 12, 2022.

Four interventions to address Columbus’s housing challenges

Housing is a critical enabler for economic growth—and Columbus’s housing challenges are no secret. Local leaders, organizations, and partnerships have long worked to improve housing security directly. Advocates and organizations have all published research on housing and homelessness, including the Mid-Ohio Regional Planning Commission, the Coalition on Housing and Homelessness in Ohio, the Affordable Housing Trust for Columbus & Franklin County, the Center for Social Innovation, and the Community Shelter Board of Columbus. 26 Healthy Beginnings at Home: Final report , CelebrateOne and the Health Policy Institute of Ohio, June 2021; Regional Housing Strategy final report: Central Ohio , Mid-Ohio Regional Planning Commission, September 2020; Annual report 2021: Preserving, creating & facilitating , Affordable Housing Trust for Columbus and Franklin County, 2021; Columbus, Ohio: Initial findings from quantitative and qualitative research , Supporting Partnerships for Anti-Racist Communities (SPARC), Center for Social Innovation, May 2018. Yet the latest estimates show that the region could need as many as 110,000 housing units beyond the current run rate by 2032 to cover expected job growth. This would require more than doubling the construction rate, from around 8,300 units per year to as many as 19,300 per year. 27 Analysis of housing need for the Columbus region , Vogt Strategic Insights, August 30, 2022.

After reviewing the available research, examining the actions taken by other local governments, and drawing on our experience in the real estate and public sectors, we have identified four key interventions that can augment existing efforts to address Columbus’s housing challenge: tap into existing housing capacity potential, reduce the cost of new construction, support homebuyers and renters, and prioritize tackling homelessness.

Tap into existing housing capacity potential

Zoning regulates how land is used, where residential or commercial buildings may be constructed, and the density of new developments, making it a key lever in changing a city’s residential landscape. The city of Columbus spans 220 square miles of central Ohio, and it has 50 more square miles of single-family zoning than multifamily zoning. 28 Nicholas Julian, “Zoning in Columbus: Single-family vs. multifamily,” Ohio Housing Finance Agency, April 2, 2019; “QuickFacts: Columbus city, Ohio,” US Census Bureau, accessed June 22, 2023. Increasing density and creating housing “hot spots” are both potential options for Columbus to address current housing supply challenges.

Increased housing density. Zoning has a direct impact on housing density. In Washington, DC, for example, areas zoned for detached single-family units typically consist of up to 1,200 units per square mile, 29 Yesim Sayin, “Single-family zoning and neighborhood characteristics in the District of Columbia,” D.C. Policy Center, July 17, 2019. compared with up to 40,000 units per square mile in large multifamily buildings. But zoning in most US cities largely restricts higher-density homes. Three-quarters of the land in US cities is barred from development for anything other than detached single-family homes—and where multifamily buildings are allowed, height and lot size requirements hurt the economic calculus for development. 30 Jenny Schuetz, “To improve housing affordability, we need better alignment of zoning, taxes, and subsidies,” Brookings Institution, January 7, 2020. Specific zoning adjustments could contribute directly to closing the housing gap, not just in the city limits but also in the surrounding suburbs. For example, a recent analysis by the Columbus Dispatch found that zoning contributed to the lack of affordable housing options in Upper Arlington, New Albany, and suburbs in Delaware County. 31 Jim Weiker, “Columbus suburbs offer few affordable housing options,” Columbus Dispatch , May 4, 2023. High-density zoning can be a meaningful part of a community’s housing ecosystem to enable future growth.

‘Housing hot spots’ created by reusing and rezoning underused property. To help alleviate the shortage of homes in the near term, municipalities can also identify potentially high-impact housing areas by reviewing the zoning of properties that meet criteria for vacant or underutilized land, homes with room for more units, and more. This approach has been used elsewhere to great effect. An analysis of three counties in California found room for more than five million new units, 32 Jonathan Woetzel, Jan Mischke, Shannon Peloquin, and Daniel Weisfield, “ Closing California’s housing gap ,” McKinsey Global Institute, October 24, 2016. and separate efforts are under way in New York City and Los Angeles to rezone underused commercial zones for residential or mixed use—making more space available for housing construction without needing to expand a city’s footprint. 33 “Mayor Adams unveils recommendations to convert underused offices into homes,” City of New York, January 9, 2023; “Adequate sites for housing,” 2021–2029 Housing Element , Los Angeles City Planning, November 2021.

Reduce the cost of new construction

A priority for the Columbus region will be reducing the cost of new construction to accelerate the pace of development. Programs that accelerate construction, reduce permit fees, or otherwise defray development costs are common levers to help reduce the cost of affordable housing. Several approaches can be prioritized to address the challenges facing Columbus and other US regions.

Innovative, cost-saving construction techniques and builders. As in many areas of the United States, inflation drove up the cost of building materials, labor, and financing in Columbus by as much as 18 percent between 2021 and 2022. 34 “How much does it cost to build a house in Columbus?,” Home Builder Digest , accessed June 23, 2023. Innovative, low-cost approaches such as modular and prefabricated construction can help; in our experience, when applied at large scale, these techniques can reduce the cost of construction materials by up to 20 percent and decrease build time by 20 to 50 percent without sacrificing build quality. 35 Modular construction: From projects to products , McKinsey, June 18, 2019. This is especially true with projects featuring repeatable elements, such as schools and affordable housing.

Columbus, specifically, can establish itself as a center of excellence for modular and prefabricated construction by leveraging the region’s transportation network (such as railroads and highways) to efficiently transport modular units into the region. The region can further attract builders that use these construction techniques by offering tax incentives, investing in land and modular units at scale, reskilling the labor force, and streamlining the approval process to help drive affordable housing growth. These and other approaches could improve the economics for these kinds of construction projects almost immediately once implemented. For example, Portland, Oregon, made changes to its design review process to allow mixed-use and multifamily projects to go directly to the permit process, saving developers time and money by decreasing their financing costs. Local governments in the Columbus region can further improve the economics of housing development by producing and holding off-the-shelf design schematics that can easily be used by prospective housing-unit developers.

Reduced development costs. Identifying parcels of public land for housing development could defray the overall cost of new projects in addition to rezoning efforts. Some cities, including Copenhagen, London, New York City, and Stockholm, have established professional management of their publicly owned land, allowing them to identify suitable city-owned sites for affordable developments. 36 “ Affordable housing in Los Angeles: Delivering more—and doing it faster ”, McKinsey Global Institute, November 21, 2019.

Accelerating the construction permit process could help reduce lengthy permit timelines that both create delays and increase developers’ costs. Under Columbus’s permit approval system, new-construction permits can take six to nine months. In fast-growing metro areas elsewhere in the United States, permits can take as little as a few weeks—a disparity that the City of Columbus is reviewing as part of its longer-term affordable-housing initiatives. 37 Allen Henry, “Columbus to overhaul zoning code for first time in 70 years,” NBC4 WCMH-TV, October 20, 2021. The Affordable Housing Trust in Columbus has launched the Emerging Developers Accelerator Program to provide education and funding for minority developers. 38 Jim Weiker, “New program seeks to build ranks of minority and female developers,” Columbus Dispatch , updated May 18, 2022. Yet the holding costs due to the lengthy time horizon between initial plans and selling the first house keep many potential developers out of the business.

Reduced development finance costs and fees. Financing costs and government taxes tend to be a heavy burden on housing developers. Legal agreements and public financing tools, such as joint powers authorities (JPAs) and tax increment financing (TIF) programs, provide incentives for public and private partners to collaborate in the development of affordable housing. In instances where traditional incentives and subsidies are unable to produce the desired outcomes, JPAs enable the city, partnered with a developer, to issue bonds and use its property tax exemption to purchase a property or finance the creation of a new development process. As part of the acquisition process, the JPA agrees to restrict the rent of a set number of units in line with affordable-housing standards. This approach is unlike traditional affordable-housing projects in that long-term ownership rests with the city, with an option to purchase the property back from the JPA after a set period.

JPAs are eligible for significant tax exemptions on their properties, with the added benefit that these savings are passed on to renters. Bond financing can also be tax-exempt given that governmental bodies have the authority to issue tax-exempt bonds for facilities that provide a public benefit. 39 “Portantino bill creating regional affordable housing trust passes assembly local government committee,” Senator Anthony J. Portantino, California State Senate, June 9, 2022; Brennon Dixson et al., The ABCs of JPAs , SPUR and the Terner Center for Housing Innovation, June 2022. In California, the Burbank-Glendale-Pasadena Regional Housing Trust is leveraging these benefits to address barriers to building nearly 3,000 affordable-housing units in the region. 40 “Newsom signs Portantino bill creating Pasadena-Glendale-Burbank affordable housing trust,” Pasadena Star-News , August 24, 2022. The JPA will be allowed to request and receive private and state funding allocations, as well as authorize and issue bonds, to help finance affordable-housing projects.

As another option, TIF districts enable cities to freeze property tax revenue at current levels and use incremental tax revenue generated from a development to reimburse the developer’s costs over time. In 2018, for example, the City of Chicago approved TIF measures for The 78, a $7 billion mixed-use project to transform a former railroad property into 13 million square feet of residential, commercial, and institutional construction with a 20 percent commitment for affordable-housing units. According to plans, this TIF district will reimburse around $551 million in future increments for the construction of new infrastructure related to this project, including a new subway station, street improvements and extensions, and riverfront renovations. 41 “The 78,” Department of Planning and Development, City of Chicago, accessed June 23, 2023.

Support homebuyers and renters

In conjunction with initiatives that improve the supply of affordable housing, Columbus can explore approaches that improve an individual’s ability to pay for housing. The region can take these approaches in tandem to reduce the risk that demand will outpace supply and drive up prices on housing, making it even more unaffordable.

Homebuyer assistance from the public sector. Increasing investment in housing programs could help broaden the range of homes applicants can consider purchasing. For example, the City of Columbus’s Housing Division currently offers homebuyer assistance under its American Dream Downpayment Initiative (ADDI), which provides eligible first-time homebuyers with a loan of up to 6 percent of the purchase price (or up to $7,500) to put toward their down payment. 42 “American Dream Downpayment Initiative (ADDI) Program,” City of Columbus, accessed June 23, 2023. This loan is forgiven after five years if the resident meets certain requirements, including maintaining residency and not selling the property.

In Cleveland, Cuyahoga County’s Down Payment Assistance Program covers up to 10 percent of a home’s purchase price (or up to $16,600). 43 “Cuyahoga County Down Payment Assistance Program,” CHN Housing Capital, accessed June 23, 2023. This higher amount is especially significant given that the median sale price for a home in Columbus was $250,000 in December 2022, compared with $175,000 in Cuyahoga County and $115,000 in Cleveland itself. 44 “Columbus housing market,” Redfin, accessed June 23, 2023. The down payment program available in Cleveland provides greater assistance in real dollars in an area where those dollars can go further than in Columbus. Beyond affordable housing, assistance in the form of microloans and flexible funding programs have been shown to enable this transition. 45 Interval House, “How flexible funding can create stability and prevent homelessness,” Long Beach Community Foundation, accessed June 23, 2023.

Increasing the amount of assistance available could help broaden the options available to prospective homebuyers who could benefit from programs such as these, especially for historically marginalized communities that tend to have much lower rates of homeownership.

Rental assistance from the public sector. Some 54,000 households in the Columbus region are spending more than half their monthly incomes on rent, making rental assistance a cornerstone of the effort to improve housing affordability in the region. 46 Homeport website, US Department of Homeland Security and the United States Coast Guard, accessed June 23, 2023. Today, the State of Ohio and Franklin County have a number of rental assistance programs, including specific funds to help families, seniors, and veterans. 47 “Rent assistance providers,” Rentful, accessed June 23, 2023. Alternative programs, including flexible funding that allows for short-term, flexible financial assistance, could help stabilize individuals’ housing needs. 48 “How flexible funding can create stability,” accessed June 23, 2023.

Additionally, HUD subsidizes rent for low-income families. 49 A family’s income may not exceed 50 percent of the median income for the county or metropolitan area in which the family chooses to live, and 75 percent of vouchers must be provided to applicants whose income does not exceed 30 percent of the area median income. For more, see “Housing choice vouchers fact sheet,” HUD, accessed June 23, 2023. For fiscal year 2023, Columbus is allocated to receive approximately $12.7 million dollars in HUD funding for housing programs—approximately 16 percent more than Austin and 35 percent more than Denver 50 “Community Development Block Grant Program,” HUD, updated December 22, 2022; “HOME Investment Partnerships Program,” HUD, updated December 22, 2022; “Community planning and development formula program allocations for FY 2023,” HUD, updated May 3, 2023. —but the need for housing support exceeds the availability of funding. Columbus and Franklin County have also received more than $120 million combined due to the reallocation of unused federal COVID-19 relief funds to fight evictions, a majority of which is expected to go toward rent and utility assistance for low-income residents. 51 Bill Bush, “Columbus, Franklin County get over $120 million windfall in federal rental assistance,” Columbus Dispatch , May 8, 2023.

In addition, the Columbus City Council has made it illegal to deny a lease based on the source of a potential tenant’s rental payment—an effort to prevent landlords from denying leases to tenants using Section 8 subsidies. 52 Yilun Cheng, “Some landlords reject Section 8 renters despite Columbus law against discrimination,” Columbus Dispatch , February 8, 2022. The Columbus Metropolitan Housing Department has even offered cash incentives to landlords, and nonprofits have offered home upgrades in attempts to persuade more landlords to accept vouchers. 53 Jamilah Muhammad, “Central Ohio mother struggles to find homes accepting HUD vouchers,” Spectrum News 1, December 1, 2021. However, while these vouchers can effectively keep people housed, wait times to obtain them can be as long as 12 months. And about 30 percent of vouchers have expired over the past three years because participants could not find landlords in time. 54 “Some landlords reject Section 8 renters,” February 8, 2022. Streamlining the process from application to placement in subsidized housing could increase the impact of housing choice vouchers.

Potential interventions from the private sector

The private sector can take an active role in ensuring housing stability for both their employees and the communities where they operate by investing in and implementing sustainable-housing initiatives.

Three actions offer the potential for significant impact:

Offer housing assistance to employees. To build effective assistance plans, businesses can assess the specific needs of their employees and design targeted assistance, including employee housing, emergency housing assistance, down-payment assistance, and mortgage rate subsidies. Sugar Bowl Resort in California offers an array of affordable employee housing options near the resort. 1 “Employee housing,” Sugar Bowl Resort, accessed June 23, 2023. In Ohio, MetroHealth launched an employer-assisted housing program (EAHP), providing eligible employees $20,000 toward the purchase of a home near the hospital’s campus. 2 “MetroHealth System employees to receive up to $20,000 to buy a home near West 25th Street main campus,” MetroHealth System, June 24, 2019. Similarly, Habitat for Humanity in Dallas, Texas, started an EAHP with up to $13,000 in a forgivable loan for down payment assistance. 3 Lin Grensing-Pophal, “Employers begin offering home-buying support benefits,” SHRM, November 8, 2022.
Invest in increasing the supply of affordable housing. Businesses can invest in building new affordable-housing units in their communities. UnitedHealthcare has invested nearly $800 million to create approximately 19,000 housing units across the United States. 4 “Building health equity with $100 million in housing,” United HealthCare Services, July 6, 2022. In Columbus, Nationwide Children’s Hospital invests in the Healthy Neighborhoods Healthy Families initiative, which aims to increase access to and supply of affordable housing. And as businesses navigate a new hybrid phase of work and reassess their footprint needs, affordable housing is a powerful way to invest in and repurpose excess space. In Columbus, the owners of Continental Centre and PNC Tower have started converting office space to residential, creating hundreds of new rental units. 5 Dean Narciso, “Nationwide Children’s Hospital builds homes in South Linden with $4.2 million fund,” Columbus Dispatch , June 24, 2021.
Focus on affordable housing in site selection. Businesses can select sites for new locations based on availability of affordable housing, as well as give preference in requests for proposal (RFPs) to commercial real estate owners who invest in expanding affordable housing. 6 Bonnie Meibers, “Chase Tower in downtown Columbus could be converted from office to residential,” Columbus Business First , updated May 23, 2023.

Housing assistance from the private sector. Private-sector employers in Columbus and across the United States play a crucial role in helping employees maintain stable housing by providing appropriate compensation. However, simply paying employees a living wage may not be enough to ensure stable housing in the face of unexpected expenses or other financial difficulties. A recent Harvard Business Review article suggests that any investment in housing assistance can both attract new workers (a growing challenge for companies across the United States, with ten million unfilled jobs 55 “Total unfilled job vacancies for the United States,” Organisation for Economic Co-operation and Development, retrieved from FRED July 7, 2023. ) and increase the productivity of existing workers (for example, by creating a shorter commute or reducing stresses related to housing affordability). 56 Edward L. Glaeser and Atta Tarki, “What employers can do to address high housing costs,” Harvard Business Review , March 14, 2023. Other housing-security interventions—such as housing search and placement services, access to shower facilities, or even temporary hotel rooms—can support employees more quickly than local social services and also reduce employee turnover. Some corporate programs can provide immediate relief to recipients, while others can provide long-term benefits to at-risk individuals over the course of several years (see sidebar, “Potential interventions from the private sector”).

Any investment in housing assistance can both attract new workers and increase the productivity of existing workers.

Employers also can collaborate to provide a broader set of resources to employees. In Cleveland, for example, the Greater Living Circle offers financial assistance for home purchase, rent, and renovation projects for employees of nonprofit institutions in the Greater University Circle area, including in low-income neighborhoods. Such collaboration is also the goal of the Columbus Regional Housing Coalition, a task force focused on convening leaders across the region to address the region’s housing and homelessness challenges.

Prioritize tackling homelessness

Homelessness across the region served by the Columbus and Franklin County, Ohio Continuum of Care has increased by 33 percent in the past decade 57 The Columbus and Franklin County, Ohio Continuum of Care is the organization that oversees programs funded by HUD in the region. ; in January 2023, more than 2,300 people in the region were experiencing homelessness. 58 “Columbus region leaders introduce new action on homelessness,” June 6, 2023.

Improving awareness of available resources and expanding access to essential resources—such as healthcare, transitional housing, and training programs—can help alleviate challenges for PEH and reduce the homelessness rate across the region.

Improve awareness of existing resources. A recurring problem in approaches to homelessness is a lack of public awareness of resources available to PEH. This is especially a concern among people who have recently lost their source of housing, including young people (aged 18–24). Partnering with other organizations to increase awareness of and augment available resources can equip individuals with the means to self-resolve or seek help earlier. Even initiatives that partner with existing organizations can provide immediate relief. For example, in December 2022, the City of Columbus partnered with Columbus Coalition for the Homeless to launch an interactive map showing the locations of warming centers and homeless shelters to help individuals find places to keep warm in the winter months.

Expand essential resources to alleviate homelessness. Expanding access to essential resources will be necessary to combat the increase in homelessness. Health resources make it much more likely that PEH will remain housed after securing a more permanent living situation. For PEH who have health issues such as substance abuse or severe mental health disorders, long-term health-focused housing should be considered. Efforts that expand housing with easily available healthcare resources could provide both immediate and gradually increasing support in reducing chronic homelessness. These resources can be combined with existing techniques for ensuring PEH have the resources they need to secure permanent housing. Other innovative solutions such as alternatives to traditional security deposits and credit scores can support PEH who may not have enough savings for a security deposit or the credit history to be approved for a loan.

One emerging strategy is providing training to PEH by placing them in some form of transitional housing and helping them find employment so that they can remain housed. Portland, Oregon, and other cities have also amended zoning to allow for more homeless shelters and more flexible group living, while increasing access to resources PEH may need. 59 “Warming stations,” City of Columbus, accessed June 23, 2023; Lindsey Mills, “Columbus leaders, community partners launch interactive map for warming centers, homeless shelters,” WBNS-TV, December 19, 2022. In Columbus, the Community Shelter Board (CSB) serves thousands of people through programs to prevent and respond to homelessness, including partnering with landlords to create additional housing capacity for PEH and with the Homelessness Prevention Network to coordinate social services in the community for PEH. 60 “Major updates to the City’s housing-related zoning rules coming August 1,” City of Portland, Oregon, July 16, 2021.

As Columbus’s population continues to grow, stressors that come from growth need to be understood and mitigated head-on through innovative approaches. Through a focus on housing development, the region’s public, private, and civic leaders are seeking to improve housing security while supporting economic development. By setting clear goals to increase the overall housing supply, reduce the cost of new construction, provide support to improve housing affordability, and assist those who are currently experiencing homelessness, 61 Community Shelter Board website, accessed June 23, 2023. Columbus could make significant strides toward sustainable and inclusive growth, set an example for other regions, and ensure that all who wish to reside here can find a place of their own to call home.

Brandon Carrus is a senior partner in, and managing partner of, McKinsey’s Ohio office, where Seth Myers is a partner and Brian Parro is an associate partner; Duwain Pinder is a partner in the Ohio office and is a leader of the McKinsey Institute for Black Economic Mobility; Ben Safran is a partner in the Washington, DC, office.

The authors wish to thank Kyoka Allen, Charlie Baca, Laura Hempton, and Sarthak Soni for their contributions to this article.

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Elsevier - PMC COVID-19 Collection

The COVID-19, power generation and economy – Case study of a developing country

Saifuddin ahsan.

a North West Power Generation Company Limited (NWPGCL), Dhaka, Bangladesh

Tanvir Ahmmed

b School of Aerospace, Mechanical and Manufacturing Engineering, RMIT University, Melbourne, Australia

The global COVID-19 pandemic created profound impact on every nation’s economy, education, healthcare, social and cultural life, domestic and international mobility at an unprecedented level. Since the start of the COVID-19 pandemic in early 2020, most nations are undergoing through frequent full or partial lockdowns, resulting in significant economic losses, and unprecedented suffering of hundreds of millions of people worldwide. Given the crucial role of electric power in economic activities, the purpose of this study is to investigate the impact of COVID-19 pandemic on power sector and economy in a developing/emerging country as a case study. The study examined electric power generation and consumption, GDP growth, export, import, remittances, and various government measures undertaken during the COVID-19 pandemic in Bangladesh. Autoregressive distributed lag (ARDL) model was used to investigate correlation between COVID-19 cases and power consumption during full and partial lockdowns. The research revealed a long-run negative relationship between COVID-19 cases and power consumption during partial lockdowns. The study also revealed that the targeted and partial lockdowns accompanied by nation-wide mass vaccination programme can steer the economy along the power sector with minimal or no impact during the COVID-19 pandemic.

1. Introduction

The COVID-19 pandemic has caused unprecedented havocs and disruptions to the economy, public health and life, education, national and international mobility, supply chain and logistics, energy and power, and many other areas of the global ecosystem. As of 11 February 2022, there were over 402 million people infected with COVID-19 and 5.7 million deaths world-wide ( World Health Organisation, 2021 ). Most countries were forced to implement full and/or partial lockdown to slow the virus spread and minimise the fatality. Fig. 1 shows the ratios of infection to population, death to infection, and double-dose vaccination for highly affected 45 countries and 8 less affected countries from Asia, Europe, North America, South America, and Africa ( World Health Organisation, 2021 , World Population Data, 2021 ). The figure illustrates that up to 57% of the entire population of some countries were infected with the COVID-19 virus. The pandemic hindered global Gross Domestic Product (GDP) growth in 2020, 2021 and continues hindering in 2022. The GDP growth rates of pre-COVID-19 pandemic in 2019 and during the pandemic in 2020 and 2021 for major developed, emerging and developing nations are shown in Fig. 2 . The COVID-19 pandemic induced economic disruption reduced the global GDP growth by 4.4% in 2020 compared to pre-COVID year 2019. This reduction is much higher than the Global Financial Crisis (GFC) in 2009. The GDP reduction was only 0.1% in 2009. The economic data for 194 countries by International Monetary Fund (IMF) showed that only 27 countries’ GDP grew higher than 0% and the remaining 167 countries experienced negative GDP growth ( International Monetary Fund, 2020 , Bajpai, 2020 ).

Impact of COVID 19 on top 45 countries till 11 February 2022.

Major economies’ GDP growths in 2019, 2020 and 2021.

The COVID-19 pandemic created a disproportionate impact on world-wide health and economy especially low-income and emerging countries as they have less resources to protect themselves against the dual (health and economic) crisis. The COVID-19 pandemic rendered over 255 million people jobless mostly in South America, Asia, Southern Europe, and Africa in 2020 ( US Global Leadership Coalition, 2021 , International Labour Organisation, 2021 , Briefing, 2020 ). Developing economies lost at least US$220 billion in income in 2020 and nearly half a billion people were driven to live below the poverty line (1.9 US dollar a day) ( UNDP, 2020 , Sawada and Sumulong, 2021 ). It is feared that the COVID-19 pandemic would reverse years of gains in the reduction and alleviation of poverty, thereby undermining global efforts to meet the Sustainable Development Goal (SDG) deadline to eliminate extreme poverty by 2030. Cascading the effect at the household level, the unemployment, loss of income, high expenditures for healthcare, and essential goods lead people to slip into poverty ( World Bank Press Release, 2022 , United Nations, 2020 , World Health Organization, 2020 ). No immediate remedy is expected as the world economic output in 2021 was only 5.5%, which was not enough to compensate the GDP losses in 2020 ( Sawada and Sumulong, 2021 , World Bank Press Release, 2022 , United Nations, 2020 , World Health Organization, 2020 , World Nuclear News, 2020 ). The entire economic value chains including electric power generation and consumption has been severely affected by lockdowns imposed by various government(s) to slow the spread of COVID-19 infection ( World Nuclear News, 2020 ).

The growth of GDP and electric power consumption have a linear correlation for all economies ( Zhang et al., 2020 , Lu, 2017 , Hirsh and Koomey, 2015 ). Normally, 1% electric power consumption growth can enhance almost 2% GDP growth based on a country’s industrial and economic activities (i.e., intensity of industrialisation and manufacturing, household income, climate condition, access to reliable and quality power and cost, etc.) ( Abdoli et al., 2015 , Kasperowicz, 2014 , Acaravci, 2010 ). Nevertheless, the relationship between electric power consumption and GDP growth shows a solid (one-to-one) correlation for emerging and developing economies compared to fully developed and matured industrialised nations as less electric power is required to produce each unit of GDP in developed nations ( Hirsh and Koomey, 2015 ). A growing economy needs higher energy and electric power to generate products and services. Thus, the demand for electric power and the rate of economic growth are interdependent. This vital power sector was severely affected by the COVID-19 lockdowns reducing nearly 2% global power demand in 2020 ( International Energy Agency (IEA), 2020b ). Fig. 3 shows the absolute term power consumption reduction in selected countries in emerging and developing nations in Asia. The relative consumption changes in selected countries for the financial year of 2018–2019 and 2019–2020 are shown in Fig. 4 . Three countries (Vietnam, China including Chinese Taipei- Taiwan and Bangladesh) recorded relative positive power consumption ( World Nuclear News, 2020 , IEA, 2020 ). All other countries led by Australia, Japan, South Korea, India, and Indonesia experienced significant reductions in relative power consumption during the same period.

Power consumption change in absolute term (TW h) in selected counties in 2020.

Relative power consumption change (%) in selected countries between 2018–2019 and 2019–2020.

Interestingly, till now, there is scant information available on the effect of lockdowns on electric power generation, consumption, and economy in the open literature. It is well established that the reduction of power generation and consumption affects the economic output (i.e., the rate of GDP growth) especially in emerging and developing nations. As our understanding of COVID-19 impact on power generation and economic growth is rather limited due to unavailability of research findings on developing economies, there is a need for research to investigate and understand the impact of COVID-19 pandemic induced full and partial (flexible) lockdowns on power generation, consumption, and economic growth in order to develop strategy, policy, and roadmap to mitigate the impact. Moreover, the emergence of Delta and Omicron variants of COVID-19, and potentially more new variants are expected to continue the havocs as the efficacy of existing COVID-19 vaccines on new and emerging variants is yet to be known and fully investigated. Therefore, the likelihood for full or partial lockdowns are expected to continue. The available reports by the World Bank, IMF and Asian Development Bank and other research organisations indicate that the lockdown causes economic losses more in emerging and developing countries than the developed and high-income nations ( Sawada and Sumulong, 2021 ).

Therefore, the objective of this study is to investigate the impact of full and flexible (partial) lockdowns on electric power generation, consumption and economic activities, and their interrelation through the GDP growth, export, import, and inward remittances for an emerging nation as a case study. The selected country for the case study is Bangladesh. It was one of several countries that experienced positive GDP growth in 2020 (3.5%) and 2021 (5.5%) ( Trading Economics, 2022 ). The study is based on primary and secondary data related to power generation, consumption, economic activities (export, import, remittances). Autoregressive distributed lag (ARDL) modelling was applied to estimate the short term and long-term impacts of COVID-19 on power consumption at different levels of lockdowns (full and partial) imposed in Bangladesh in 2020 and 2021. The following is the study layout: a) power generation and consumption scenario during COVID-19 pandemic, b) ARDL modelling of COVID-19 impact on power and economy during full and partial lockdowns, c) impact of COVID-19 on export, import and remittances, d) discussion of research findings, and e) conclusion and implication of the study.

2. The COVID-19 lockdowns and power generation in Bangladesh

Along with all other countries, Bangladesh has also been experiencing the impact of the COVID-19 pandemic. Bangladesh, a country of 160 million people with an estimated GDP of 330 billion US dollar, has recorded 1,894,535 COVID-19 infections and 28,744 deaths as of 12 February 2022. An infection to death ratio is 1.5 ( World Health Organisation, 2021 , World Population Data, 2021 ). To lower the spread and control the pandemic, Bangladesh imposed its first lockdown as “general holiday” from 26 March 2020 to 30 May 2020 shortly after the announcement of first death caused by the COVID-19 virus ( IEEFA, 2021 , Sajid, 2021 ). After the relaxation of lockdown, the economic activities were gradually resumed. However, in 2021, the 2nd lockdown was imposed from 5 April to 11 August to control the second wave of infections by delta variants and minimise the casualties. The educational institutions (schools, polytechnics, and universities) were closed from 26 March 2020 to 18 September 2021 (nearly 18 months long closure). During lockdown periods, the economic activities were disrupted. Numerous industries and commercial spaces were temporarily closed affecting the power generation, consumption and economic activities.

Nearly 99.5% Bangladesh's population has access to electric power through grid and off-grid connections. Despite the significant power generation capacity increase over the decade, the consumption demand outstrips the generation of power by over 10%. As of 31 December 2021, the installed power generation capacity was 25,235 MW (including captive power) which is 6 times higher than the installed capacity in 2009. Bangladesh is considered an emerging nation as it has witnessed accelerating economic growth in industrial, agricultural and technological sectors with an improving Human Development Index (HDI) over the decades. It may be noted that countries with no appreciable economic growth and HDI improvement are considered developing nations ( World Population Review, 2022 , Art of Smart, 2022 ).

To examine the impact of lockdowns on power generation, the monthly power generation in 2019, 2020 and 2021 has been studied here. Furthermore, daily load curves during working days, weekends, full lockdown, and partial lockdown were analysed. The monthly maximum power generation in 2020 was benchmarked against the power generation in other years. The total power consumption was also studied. The daily maximum power generation for 2019, 2020 and 2021 (till September) is shown in Fig. 5 . The first COVID-19 lockdown was imposed in Bangladesh at the end of March 2020 which was lasted till early July 2020. The effect of lockdown on power generation is visible from early April to June 2020. During this time, the power generation was reduced. Shutdown of industries, commercial spaces/activities, educational institutions, social, cultural, and religious places attributed to the reduction. A reduction of 40% power generation was found in May and June 2020 compared to the generated power of corresponding months in 2019. The reduction was attributed by the strictly enforced COVID-19 full lockdown and super cyclone ‘Amphan’ (the first super cyclone in the Bengal Sea between 1999 and February 2022). Apart from the reduced generation and consumption caused by the full lockdown, the Amphan also contributed to the reduced power generation and consumption. The power infrastructures (transmission and distribution systems) in Southern Bangladesh were severely damaged thereby limiting the power supply capability to the consumers. However, the maximum power generation recovered to pre-COVID-19 level from July 2020 once the power supply infrastructures in southern Bangladesh were restored and the full lockdown was withdrawn. It is interesting to note that the maximum power generation and consumption were exceeded by 14% in May and June 2021 when no lockdown was imposed compared to the corresponding months in 2019. The daily power load during full and partial lockdowns, and year before the full lockdown on weekdays and holidays for Dhaka city is shown in Fig. 7 , Fig. 8 . Dhaka is the capital and largest city of Bangladesh. The city is the country’s largest power consumer. It generates nearly 25% of Bangladesh’s GDP. The days in the graph are chosen in such a manner that the ambient temperatures of those days are similar. The power uses in weekday was reduced by up to 20% at peak hours during the full lockdown period ( Fig. 6 ). The power demand during a day of partial lockdown is substantially higher than that of during the full lockdown, despite these two days are two months apart. It indicates that the strict (full) lockdown had more impact on power consumption than that of the partial (flexible) lockdown. It can also be noted that power demand during daytime on partial lockdown is identical to pre-COVID-19 demand level, indicating the recovery of power demand when lockdown is relaxed or withdrawn.

Daily maximum generation (MW) for the year 2019, 2020 and 2021 (up to September), adapted from Bangladesh Power Development Board, 2021 , Power Grid Company of Bangladesh, 2021 .

Daily power load on weekdays.

Daily power load on holidays.

Monthly maximum generation from the year 2017 to 2021 (till September).

The power demand in holidays is considerably lower during the full lockdown ( Fig. 7 ). As economic activities were restricted and people were confined at home, outdoor activities including short stay tourism, commercial and community activities and engagement were stopped, the power demand for these activities was reduced drastically. Our initial focus was on the comparison of different daily generations with the previous year. The investigation on monthly maximum generation and daily load clearly indicates that there is an impact of lockdown on power consumption. However, the effect of lockdown on the growth of power usage is a more significant indicator. Therefore, the overall growth of maximum power generation and energy consumption have been investigated to comprehend the impact of lockdown in a broader context.

The monthly maximum generation for 2017, 2018, 2019, 2020 and 2021 (up to September) are plotted in Fig. 8 . It is apparent that the overall power generation has been growing every year from 2017 to 2021. The power generation trend from years 2017 to 2021 depicts that the maximum generation starts to increase from the beginning of year and decreases at the year-end. But for the year 2020, the maximum generation increases until March and then sharply falls in April due to the strict (full) lockdown. It is also noted that the maximum generation in April 2020 is less than that of the previous month. On the other hand, the maximum generation is nearly 33% more in April 2021 compared to the previous year. Hence, this reduction in power generation is certainly caused by the strict (full) lockdown culminated with the super cyclone ‘Amphan’.

Whilst, as observed from previous year’s data ( Fig. 8 ), the maximum generation increased from March to April. The maximum monthly power generation in 2020 follows a similar trend as 2021, 2019, 2018 and 2017. However, the power generation was higher in October and November in 2020 compared to 2019. This rise is due to higher economic activities occurred immediately after the COVID-19 restrictions were relaxed and higher than normal economic activities took place to recover the losses incurred during the full lockdown.

In Fig. 9 , the total and per capita power consumption are shown over a twelve-year period to illustrate the historic trend of power uses in Bangladesh. The power consumption data presented in the figure is determined for the period of 1 July to 30 June of next year. The data indicates that the total power consumption has been increasing steadily. To assess the lockdown's impact on power consumption, the actual power consumption in 2019–2020 is compared to the power consumption of previous years as well as the power consumption of the following year (excluding captive power generation by industries and off-grid renewable energy).

Total and per capita power consumption (Financial Yearly).

Despite having grid-connected power access to nearly 99.5% of the population, the per capita power consumption is still low in Bangladesh compared to countries with similar economies, climate conditions and per capita GDP. However, it is evident that the per capita power consumption is progressively increasing with the increase of per capita GDP growth. The Compound Annual Growth Rate (CAGR) is used to determine the annual growth rate as it takes into consideration the fluctuating values over a period. The CAGR formula shown in Eq. (1) incorporates the initial value, final value and number of compounding years and provides the growth rate in percentage.

The CAGR of total power consumption is 9.58% for the last decade. The projected total power consumption for 2019–20 using CAGR value is roughly 67,977 million kW h. Whereas the actual total power consumption of 2019–20 is 63,364 million kW h ( Bangladesh Power Development Board, 2021 ). That implies the actual growth rate between FY 2018–19 and 2019–20 is 2.14%. It is mentioned earlier that the general lockdown came into effect on 26 March 2020. So, for the sake of determining growth rate during the lockdown period, it could be assumed that the growth rate was 9.85% from 1 July 2019 to 25 March 2020 and the actual impact of lockdown on power consumption lies between the period of 26 March 2020 and 30 June 2020 of the fiscal year 2019–20 with the imposition of COVID-19 lockdown. With this assumption, the growth rate of three months (April–June) of 2019–20 financial year is calculated as − 18.42% ( Table 1 ).

Estimated growth rate during lockdown period (26 March 2020–30 May 2020).

The determined loss is shown in Table 2 . The bulk rate of power was obtained from Bangladesh Energy Regulatory Commission (BERC) (2021 ). With the assumptions mentioned earlier, it is found that the estimated loss of revenue from sales of electric power due to 66 days’ lockdown in 2020 is 23,849 million Bangladesh Taka-BDT (equivalent to 281 million USD).

Estimated loss due to strict lockdown of 66 days (26 March 2020–30 May 2020).

Despite Bangladesh being an energy deficient country, over 60% of its power generation is undertaken by indigenous natural gas and around 35% of remaining power is generated by imported liquid fuel. It also imports power (5%) from neighbouring India. Power generation using different fuel types from February 2020 to December 2020 is shown in Fig. 10 using a 100% stacked area plot. The figure clearly indicates that the power generation by natural gas was highest in the earlier part of the lockdown period. The power import remains constant since June 2020. Coal-based power generation has also remained steady during the larger part of lockdown period, except in late May 2020 when there was a sudden drop in coal-based power production due to scheduled maintenance of the power plant. However, the power generation by all fuel types quickly recovered from late June 2020.

Power generation fuel mix from February 2020 to December 2020.

3. ARDL modelling of the COVID-19 impact

To examine the effect of COVID-19 imposed lockdowns on Bangladesh's electrical power consumption, the Autoregressive Distributed Lag (ARDL) model developed by Pesaran et al., (2001) was used for the following three phases:

Phase 1: COVID-19 induced General Holiday and Strict Lockdown (26 March 2020–30 May 2020).

Phase 2: Partial Lockdown to stem the spread of COVID-19 prior to Vaccination Drive (31 May 2020–6 February 2021).

Phase 3: Partial Lockdown with COVID-19 Vaccination Drive (7 February 2021–30 September 2021).

The ARDL model was used because the data sample size was small. When the sample size is small, the ARDL model is effective as it avoids issues with auto-correction and omitted variables. The impact on daily electrical power consumption in GWh (EnCons) has been investigated as a function of independent variables such as daily COVID-19 cases (CovCase), and max. ambient temperature of the day (AmbTem) in the capital city.

As a pre-condition of applying ARDL model, Unit Root Tests have been carried out by using Augmented-Dickey-Fuller (ADF) method to check the stationarity of the variables to avoid having spurious regression results. Each of variables has been tested both for Trend and Intercept. Probability values of the unit root test are given in Table 3 .

Unit root tests results.

The unit root tests suggest that all variables are stationary either at level or first difference at 5% level of significance. Hence, all test variables are statistically significant for all three phases of the period and satisfy the precondition of the ARDL model.

The Eq. (2) has been used for ARDL modelling:

In Eq. (2) , X comprises the fixed variables and factors that are likely to have influences on energy consumption, and ε t is the error term. Model selection method to determine optimum lag of the dependent variable and regressors was Akake info Criterion (AIC). The short-run coefficient and probability of the variables from ARDL model for all three phases are given in Table 4 .

Short-run coefficient and probability of the variables.

** denotes 1% significance level and * denoted 5% significance level.

The results of statistical test of the model are shown in Table 5 . The R 2 value, adjusted R 2 value for all three phases indicate that the model is well fitted. The probability of F-statistic is 0.00% for all phases and thus the overall model is significant. The model has also been tested for Stability Diagnostics by using Cusum test and the cumulative sum of the recursive residuals was found within 5% critical line for all three phases. It is apparent from Table 4 that the COVID-19 Cases have negative impact on energy consumption in the short run for both Phase 1 and Phase 2 periods. However, for Phase 3 after the start of vaccination drive, correlation with COVID-19 cases and power consumption is not evident as the result is statistically insignificant. Thus, this model confirms the observed effect of the lockout restriction level on electrical energy usage in Fig. 5 and Fig. 8 . However, the ambient temperature demonstrated strong correlation with the power consumption in short run with 1% level of significance in all three phases of lockdown period. Nevertheless, in Phase 1 while strict lockdown and general holidays were persisting, the industrial and commercial demand of power fallen sharply, and the residential loads (mostly ambient temperature sensitive cooling, appliances, and lighting loads) were predominant. Thus, the ambient temperature had strongest correlation with the energy consumption during Phase-1 lockdown.

Statistical test of the model.

To estimate the long run relationship between the dependent variable and independent variables, ARDL Long Run Form and Bounds Test were carried out. The results are given in Table 6 . From the Bounds Test, it is found that the F-statistic value is higher than I(0) and I(1) at 5% level of significance for each of the Phases 1, 2 and 3. Thus, it can be summarised that there is a long run relationship between the dependable variable and independent variables. Moreover, for both independent variables (AmbTem & CovCase), the probability values are less than 5% and t-Statistics are more than 2 in absolute form and thus the regressors are statistically significant for Phases 1 and 2 but for Phase 3 only the AmbTem is statistically significant but not the CovCase.

ARDL Long Run Form and Bounds Test results.

Since there is cointegration relationship between independent variable (Power Consumption) and independent variables, Conditional Error Correction ARDL estimations were applied using Eq. (3) . Results of Error Correction ARDL estimate are shown in Table 7 .

Where ∆ is the first difference operator and EC t−1 is the error correction term, which captures the long-run relationship between dependent variable and regressors. The residual series (ECT) analysis for Phases 1, 2 and 3 were estimated and the series were found stationary at level from the unit root test, which also suggest that long run relationship exists.

The Error Correction ARDL estimates.

From the Error Correction Regression, the coefficient of one period lag ECT is negative (between 0 and − 1) and the probability value is statistically significant. Hence, the model will adjust towards long run equilibrium. The coefficient of ECT (− 1) for Phase 1 is − 0.386770 which shows the speed of adjustment towards equilibrium. Here, the speed is 38.68% per unit time; that means 38.68% adjustment per day as daily data is used. Similarly, for Phase 2, the speed towards long-term equilibrium is 16.21% per day and that is 30.0% for Phase 3.

4. Effect of COVID-19 lockdowns on export, import and inward remittances

Bangladesh is an export-oriented manufacturing nation. Having over 160 million people, it possesses an abundance of unskilled and semi-skilled labour force. Some excess labour force seeks work opportunities abroad especially in the Middle East, South-East Asia, North Asia, Oceania, Europe, North America, South America, and Africa. At present, over 14 million expatriates from Bangladesh work temporarily and/or permanently abroad, and send remittances, making Bangladesh the world’s 8th largest remittance recipient nation ( World Bank Report, 2020 ). Economic activities such as, inward remittance, export, and import are strongly intertwined in Bangladesh.

4.1. Export, import and inward remittances

In April and May 2020, a significant decline in foreign trades and inward remittances occurred due to strict (full) lockdowns in Bangladesh and its major export destinations in Europe and North America. However, once the lockdowns were lifted in Bangladesh and its export destination countries, the export, import, and inward remittances returned to pre-COVID-19 levels as shown in Fig. 11 , Fig. 12 ( Bangladesh Bank, 2021 , Mahmud, 2021 ). Despite a decline during the lockdown months, the inbound remittances increased substantially once the lockdown restrictions were withdrawn. Surprisingly, the inbound remittances were higher in 2020 and 2021 than that of the prior years ( Fig. 13 ). Bangladesh and Pakistan are only two countries that received higher remittances during the COVID-19 pandemic ( International Monetary Fund, 2020 ; World Bank Report, 2020 ; Saveh and Chami, 2020 ). The reasons for higher remittance flow is due to: a) Bangladesh government’s cash incentives (2%) and fees remediation for remittances sent through legitimate financial systems (i.e., discouraging cross border money laundering and hundi), b) International travel restriction due to COVID-19 made remittance transactions harder through hundi and other illegitimate systems, c) Continuing financial support to families located in rural Bangladesh to minimise their financial hardship. The unskilled and semi-skilled migration patterns in Bangladesh differs from other South Asian countries. Over 85% of 14 million Bangladeshi migrants overseas are from the rural Bangladesh where 65% of the country’s total population (160 million) live. This remittance inflow was critical to keep the rural economy vibrant.

Monthly export and import of goods and services from July 2018 to June 2021.

Monthly inward remittances from January 2018 to December 2021.

Yearly inward remittances from 2018 to 2021.

Regarding yearly inward remittances, as shown in Fig. 13 , the remittances were increased by 10.9% in FY 2019–20 and further 35.8% in FY 2020–21 despite the global COVID-19 pandemic. A declining trend of inward remittances is noted from June 2021 which is assumed to be a belated impact of COVID-19 as expatriate workers faced a major layoff at different stages of the COVID-19 crisis and informal channel of remittance inflow reopened once the travel restrictions were eased ( Mahmud, 2021 ). The relative drop of inward remittances in 2016–2017 was due to the fall of oil prices in the middle east forced some layoffs where most Bangladeshi expatriates work.

4.2. Export and import

Yearly category-wise export and import performance for the last 12 years are shown in Fig. 14 . It is evident that the export of ready-made garment products (Bangladesh’s major export item) was consistently increasing up to FY 2018–19. In FY 2019–20, this vital export sector experienced 10.96% shrinkage due to COVID-19 pandemic. The growth of other export sectors was relatively smaller compared to ready-made garments. Total export in FY 2019–20 was reduced by 11.45% compared to FY 2018–19, whereas in the previous year (2018–19) the growth rate was 8.58%. The lowest monthly export and import were recorded in April and May 2020. The trend of yearly import is akin to export. Total import was growing rapidly from FY 2016–17 up to FY 2018–19 as seen from Fig. 14 . The reduction of imported goods was 13.45% in FY 2019–20 compared to 5.77% in FY 2018–19. As Bangladesh economy is export oriented, the import reduction was associated with the export reduction. For the export of ready-made garments, raw materials (e.g., textile articles, cotton, yarn, fabrics, dyeing materials, etc.) and capital machinery are required to import. However, both export and import were increased to pre-COVID level in FY 2020–21 with 12.78% growth in export and 12.0% growth in import once the COVID-19 lockdown is eased. The nation- wide COVID-19 mass vaccination programme was commenced from early February 2021. As of 12 February 2022, over 41% eligible population was fully vaccinated, and national target is to achieve 80% fully vaccinated population by April 2022. With the increase of vaccination rate, it was possible to ease lockdown restriction for resuming full economic activities with certain COVID-19 safety conditions (e.g., social distancing at public places, offices, and wearing mask, etc.).

Yearly export and import by category from FY 2009–10 to FY 2020–21.

4.3. Annual development program (ADP) implementation and GDP growth

As an emerging nation, Bangladesh is currently investing in infrastructure development, education, health, and social safety network as part of its annual development program (ADP). The ADP expenditure is a significant determinant of the country's GDP growth. Last 12 years’ ADP expenditures are shown in Fig. 15 ( Implementation Monitoring & Evaluation Division (IMED), 2021 ). During the initial phase of COVID-19 pandemic, Bangladesh experienced 4.1% shrinkage of ADP expenditures, creating a slowdown in the implementation of development projects. The outbreak of COVID-19 pandemic triggered ‘force majeure clause’ of most contracts for the development projects. During the pandemic, the supply chain was disrupted, optimum labour forces could not be utilised, and there were other direct and indirect impacts for which contractual obligations could not be fully enforced and or/ executed. Consequently, the major development projects were being delayed and ADP implementation was reduced in 2019–20. However, the ADP expenditures increased in 2020–21 by 6%. With the continuing growth of inward remittances (that kept rural economic activities vibrant) and stable domestic agricultural production, Bangladesh achieved 3.5% GDP growth in 2019–2020 and 5.5% in 2020–2021. The rate of GDP growth for three major economies in South Asia, India, Bangladesh, and Pakistan for the last six years, published by Asian Development Bank (ADB), are shown in Fig. 16 ( Asian Development Bank, 2021a , Asian Development Bank, 2021b ). Bangladesh is the only country in South Asia that achieved positive GDP growth during the COVID-19 pandemic. As per Bloomberg’s COVID-19 resilience ranking, Bangladesh was positioned 17th out of 53 global economies worth over USD 200 billion ( The COVID Resilience Ranking, 2021 ).

Annual development programme (ADP) expenditure.

GDP growth rate of Bangladesh, India, and Pakistan.

5. Discussion

Power generation and consumption, GDP growth, inward remittances, export, and import are interrelated especially for Bangladesh. The power consumption and GDP growth also depend on relative level of development, access to power, industrialisation, economic makeup, and income levels ( US Energy Information Administration, 2017 ). Power consumption plays a crucial role in economic development. Studies undertaken on power consumption and economic growth for developed and developing countries over the period from 1960 to 2020 show a long-run equilibrium relationship and a bi-directional Granger causality between power consumption and economic growth ( World Nuclear News, 2020 , Saveh and Chami, 2020 , Hu and Wang, 2015 , Chang, 2010 ). Generally, an increase of 1% power consumption can boost the annual GDP growth by up to 2% ( Bayar and Özel, 2014 , Shahbaz and Feridum, 2012 , Nazlioglu et al., 2014 ). However, the power consumption and annual GDP growth vary between developed and developing countries. For example, countries of the Organization for Economic Cooperation and Development (OECD) gradually move from manufacturing economies towards service economies. The service-based economies tend to use less energy/power than economies with high levels of industrial activity. Commercial services are less energy-intensive compared to manufacturing. OECD countries with sizable manufacturing are shifting toward advanced manufacturing, which uses energy efficient technologies (i.e., less energy intensive). Therefore, additional economic activity can be generated without requiring high power use in developed industrialised nations. In contrast, emerging nations including Bangladesh use labour and energy intensive technologies for their industrialisation and economic development. Hence their power consumption is relatively higher than industrialised developed countries even with the same annual GDP production.

According to International Energy Agency (IEA2020), the world average sector-wise power consumption: industry – 40%, residential – 30%, commercial and public services – 20%, transport – 2% and others 8% ( IEA, 2020 , World Bank, 2020 ). In Bangladesh, the residential sector consumes the highest percentage – 56.4% followed by the industrial sector – 28.4%, commercial and public services – 10.6%, agricultural sector – 2.4% and others – 2.2% as shown in Fig. 9 for FY 2020–21. Comparing Bangladesh with similar per capita nominal annual GDP nations such as India, Pakistan, Uzbekistan, the residential sectors of those countries consume 25%, 42%, 23% respectively compared to the world average of 30% and Bangladesh’s 56.4%. The industrial sector in Bangladesh consumes 28.4% compared to 41% in India, 30% in Pakistan, 40% in Uzbekistan. The per capita GDP and annual power consumption for Bangladesh, India, Pakistan and Uzbekistan are shown in Table 8 . The compound annual power generation growth of nearly 10% in Bangladesh since 2010. This growth is mainly driven by the residential sector in rural and urban areas and a lesser extent by the commercial sector. Bangladesh has undertaken massive electrification in rural areas where nearly 65% of its 160 million people live. Power access in rural Bangladesh accelerates economic activities by creating employment and consumption. The power consumption by small industry and cottage industry in rural areas is classified as residential power consumption which is one of reasons for the higher residential power consumption figure in Bangladesh.

Yearly per capita GDP and per capita power consumption.

Around a decade ago, due to unreliable grid-connected power supply, over 2905 large industries and enterprises in Bangladesh built captive power plants with a generation capacity of 3700 MW. Furthermore, 2389 small industrial units possess captive power plants (less than 1 MW) with approximately 1000 MW generation capacity. The total industrial captive power generation capacity is 4700 MW (i.e., nearly one-quarter of the current grid-connected installed capacity (19,788 MW)) ( Sajid, 2021 , Bangladesh Energy Regulatory Commission, 2021 ). Current per capita power consumption does not include the captive power generation and consumption. If it is accounted, the per capita power consumption would increase by another 100 kW h (i.e., 435 + 100 = 543 kW h). Therefore, it is difficult to estimate the impact of COVID-19 on power consumption by industrial sector in Bangladesh. However, most captive power plants in Bangladesh use natural gas to generate power. Monthly gas supplied to captive power plants in 2019, 2020 and 2021 (up to June) is shown in Fig. 17 ( Bangladesh Energy Regulatory Commission, 2021 , Petrobangla, 2021 ). Gas supply to these power plants can be considered a reference for the captive power generation. In April 2020, when full lockdown (general holiday) was imposed, the gas supply was decreased by more than 63% compared to the previous month. Many factories were temporarily closed during this time, resulting in a reduction of gas for captive power generation. Gas demand rebounded to pre-COVID-19 levels once strict lockdown was eased ( Fig. 17 ). Apart from three months (April–June 2020) strict lockdown, the economic activities continued as like pre COVID-19 period, boasted by domestic consumption of 160 million people with the government’s timely and targeted fiscal stimulus packages (nearly 22 billion US dollars), and increased inflow of remittances from abroad. Export losses due to COVID-19 lockdown are comparatively higher as the cumulative export dropped by more than 11% in FY 2019–20 compared to pre-COVID-19 period due to the global disruption of supply chain and COVID-19 impact on export destinations. However, the overall foreign trades in FY 2020–21 recovered well with only 2% shortfall, compensated by higher remittance flow and lower import cost.

Gas supplied to captive power plants of industries.

As determined by the ARDL modelling, the number of COVID-19 cases has had a negative influence on Bangladesh's power consumption in both the short and long run. It is evident that the stringent (full) lockdown has severe effect than the partial or flexible lockdown. During the first phase of lockdown (26 March 2020–30 May 2020), Bangladesh experienced a decline in power consumption, even though COVID-19 cases were relatively low at the time. Power generation and consumption returned to normal as economic activity gradually resumed in the second phase of (partial and or targeted) lockdown, starting on 31 May 2020. Thus, the impact on power generation and consumption was minimal. Finally, during the third stage of partial and flexible lockdown along the nation-wide COVID-19 vaccination campaign, the power generation and consumption were irresponsive to COVID-19 pandemic, despite having more severe Delta variant outbreak, and later contagious Omicron variant occurrence.

Bangladesh with one of the world’s highest population densities per square kilometre area (1265 people/km 2 ) learned and managed well the COVID-19 lockdowns since March 2020 to minimise the impact of COVID-19 on economy and health. It has developed a so called Bangladesh model of lockdowns to advance its economy during the COVID-19 pandemic. The Bangladesh model constitutes the following:

a) Full lockdown was strictly enforced across the nation by engaging all law enforcement agencies including ansar-village defence party, police, border guard Bangladesh, coast guard Bangladesh, and armed forces (army, navy, and air force) to slow down the virus spread and take time to prepare medical facilities including constructing field hospitals and recruiting additional doctors (4000), nurses (6000) and other medical staff (over 3000) to deal with the COVID-19 emergencies. Vulnerable people were provided food and other essentials free of cost. Export oriented industries were given financial support to keep people employed.
b) Flexible and targeted lockdowns were enforced with the nation-wide vaccination campaign to keep running all economic activities. A total of 22 billion US dollar stimulus packages was disbursed to all economic sectors (industrial, agricultural and commercial), vulnerable communities and various professions.
c) Export and import facilities (seaports, river ports, land ports, airports, customs, banks, logistics and transports, etc.) were kept fully functional during full (stringent) and partial (flexible) lockdowns. The medical safety was ensured for all people working in these facilities, processes. These people were vaccinated as per other COVID-19 frontal people. Expatriates were encouraged to remit more money to Bangladesh by providing cash incentives for upholding the domestic consumption and economic activities especially in rural Bangladesh where over 65% population live.

The above-mentioned Bangladesh model directly enabled continuing the power generation and consumption with minimal impact. During the full lockdown period, a small number of industries was temporarily closed. However, the industrial consumption of power was not reduced much compared to commercial and community consumers. During the flexible lockdowns, the power consumption by commercial sector, charitable institutes, community centres, cultural centres, religious worshipping places (mosques, temples, churches, pagodas, etc.), and temporary connections to construction sites was started again. The cumulative power consumption was increased in 2020 compared to 2019 due to the ongoing and new connections to construction sites offsetting the consumption by others within this category throughout the year. Overall, the power consumption in industrial, commercial, agricultural, and other sectors showed an upward trend in 2020–21 and 2021–22 after introducing the flexible and targeted lockdowns.

6. Conclusion and policy implications

The COVID-19 pandemic affected the power generation and consumption in Bangladesh. The severity of impact depended on the type of lockdowns (full/strict or partial/flexible). The full lockdown impacted severely the power generation and consumption. However, the partial lockdown along with the vaccination programme has no or negligible impact on power generation and consumption due to the resumption of economic activity to its pre COVID-19 level.

During the full lockdown, the total power generation and consumption were reduced by 30–40% for a very short time. The commercial sector’s consumption was reduced by 14% which was offset by the increased residential sector’s consumption as the residential sector is the largest power consumer (57%) in Bangladesh.

The COVID-19 pandemic influenced the fuel used in power generation. During the full lockdown, the liquid fuel-based power generation was reduced resulting in lower greenhouse gas emission and the cost of import. However, with the relaxation of lockdown and nation-wide vaccination programme, the liquid fuel use in power generation has progressively been increased with the higher power demand created by economic activities.

The effect of COVID-19 pandemic on rural power consumption and economy is negligible during the lockdown as the production and consumption were remained as pre COVID-19 level thanks to inflow of higher than usual remittances by expatriates, higher agricultural production, and government financial stimulus packages. However, the urban population (35% of the total population) is slightly affected due to temporary job losses in informal sectors and some service sectors during the full lockdown period.

Overall, the COVID-19 pandemic reduced Bangladesh’s GDP growth to 3.5% in 2020 and 6% in 2021 from 8.2% in 2019 (prior COVID-19 outbreak). In 2021, all economic indices (consumption, government expenditure, inward remittances, and net export), power generation and consumption have exceeded pre-COVID-19 levels.

The ARDL modelling indicates that the prudent lockdown (flexible and targeted) along with the nation-wide vaccination campaign helped to minimise the COVID-19 pandemic’s impact on power consumption. The targeted, selective, and flexible lockdowns with the vaccination programme and preparation for COVID-19 emergency healthcare services is vital for creating economic confidence, and sustainable development.

The policy implication of the case study of Bangladesh is that the full lockdown without the vaccination programme would severely harm the power generation and consumption resulting in significantly lower economic activities and GDP growth. It is especially important for emerging and developing countries as the lower economic activities can push millions of people below poverty line ($1.90 per day). Therefore, the emerging and developing nations can follow the Bangladesh model to minimise the COVID-19 impact on their power generation, consumption, economic activities, and health. As the world-wide mass vaccination would require several years, therefore, the havoc of various COVID-19 variants (Delta, Omicron, etc.) is expected to continue for many years to come. Hence, the Bangladesh model (targeted, selective, and flexible lockdown with the mass vaccination campaign and financial stimulus support) instead of full (strict) lockdown would be effective way to live the COVID-19 pandemic emergency.

CRediT authorship contribution statement

Saifuddin Ahsan: Conceptualization, data collection, Formal analysis, Visualization, ARDL modelling and Writing – original draft, Writing – review & editing. Tanvir Ahmmed: Data curation, Investigation, formatting, Validation. Firoz Alam: Writing – review & editing, Supervision.

Declaration of Competing Interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Acknowledgement

The authors express their sincere thanks and gratitude to Power Grid Company of Bangladesh Ltd (PGCB) and Bangladesh Power Development Board (BPDB) for providing power data and their invaluable suggestions.

This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.

Biographies

Firoz Alam is Professor and Program Director in the School of Aerospace, Mechanical and Manufacturing Engineering, RMIT University in Melbourne, Australia. He completed his Ph.D. in 2000 and MSc combined with BSc in Aeronautical Engineering in 1991. Prof Alam’s research interest includes Energy, energy policy, energy security, power generation, aerodynamics and hydrodynamics, HVAC, engineering education and quality assurance. Prof Alam is a Fellow of the Institution of Engineers Australia, Chartered Professional Engineer, and member of other professional organisations (American Society of Mechanical Engineers-ASME, American Institute of Aeronautics and Astronautics-AIAA, Society of Automotive Engineers-SAE, International Association for Energy Economics-IAEE). Prof. Alam has over 250 peer reviewed scientific publications including books, book chapters, journal articles and conference papers. He is the recipient of RMIT University best teacher award in 2004.

Saifuddin Ahsan is a practicing professional engineer. He has been working at North-West Power Generation Company Limited (NWPGCL), a state-owned company of Bangladesh since the completion of his Bachelor of Engineering (B.Eng.) in Mechanical Engineering from Bangladesh University of Engineering and Technology (BUET). He has also completed MBA degree from the University of Dhaka, Bangladesh. Mr. Ahsan is currently superintendent engineer at NWPGCL. His expertise includes power plant design, construction, operation, energy and power policy, and energy security. He collaborates with research and academic institutions including RMIT University. He has published 10 peer reviewed book chapter, journal articles, and conference papers. He is member of the Institution of Engineers Bangladesh.

Tanvir Ahmmed is an executive engineer at North-West Power Generation Company Limited (NWPGCL), a state-owned company of Bangladesh. He completed his Bachelor of Engineering (B.Eng) in Mechanical Engineering from Bangladesh University of Engineering and Technology (BUET). He has completed MBA degree from the University of Dhaka, Bangladesh. Mr. Ahmmed’s expertise includes power plant operation, power generation, distribution, energy and power policy, and energy security. He has published 5 peer reviewed journal articles and conference papers. He is member of the Institution of Engineers Bangladesh.

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The Relationship Between Financial Development and Economic Growth: New Insights Using Quadruple and Quintuple Helix Innovation Framework and Way Forward

Published: 28 April 2023

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Abdul Rahman ORCID: orcid.org/0000-0003-1893-9756 1 &
Muhammad Arshad Khan 2

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In this study, we showed that the spurts and reversals in GDP growth can be reinvented through consistency in financial and real sector policies along with the strengthening of knowledge democracy, and quality of democracy. To revert the toing and froing situation, this study emphasizes the importance of bringing together quadruple and quintuple helix actors (academia, industry, government, and civil society) to strengthen financial innovations. The quadruple and quintuple helix model forms an integral part of innovation policy, which helps to strengthen finance-growth nexus in developing countries like Pakistan. The present paper suggests that innovations and knowledge democracy are important determinants of finance-growth relationship besides other macroeconomic variables. Despite the importance of the quadruple and quintuple helix model, the model is still far from well-established concept in research and innovation policy in Pakistan. To this end, constructive steps are proposed to espouse the quadruple and quintuple helix innovation model to support government to engage with and facilitate the participation of civil society in discovery process. The policymakers may take necessary steps to strengthen academia-industry-government-civil society relationships, and ensure knowledge democracy and quality of democracy to achieve sustainable growth. The study contributes to the existing literature on innovations through identifying mechanism to foster the quadruple and quintuple helix model.

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case study on economic growth and development

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Carayannis et al. ( 2021 ) explained the concept of quality of democracy as “a concept and approach, focuses on framing and defining democracy beyond the minimum standards as they are being set out in the so-called electoral democracy. Quality of democracy refers to more advanced forms of democracy, and indicates what possible pathways of progress and further development and evolution of democracy exist.”

Financial development is a very broad concept as compared to financial liberalization. However, in this study we have used both terms interchangeably.

Pantelic ( 2019 ) put that knowledge democracy emphasizes the importance of knowledge and innovation: for the quality of democracy, sustainable democracy, society, and economy.

The concept of Pareto optimal equilibria is extensively used in welfare economics, which states that markets will be perfectly competitive while allocating resources. The financial liberalization paves for Pareto optimal equilibria since markets are competitive and allocate resources optimally. On the other hand, the financial market that follows repressive policies causes asymmetric information and hinders well-functioning of Pareto optimal equilibria due to government interference in choosing optimal allocation of resources.

These measures were economic partnership agreements, structural adjustment programs, financial liberalization policies, and economic recovery programs (Asamoah et al., 2016 ).

Few reform measures were privatization of financial institutions, removal of entry barriers for foreign banks, elimination of credit controls and ceilings, deregulations of interest rate, autonomy to SBP, revamping of institutions, and enhancement in bureaucratic quality etc.

See graphic representation on Pakistan’s episodic growth in Fig. 1 and Fig. 2 .

For further details, see Berthelemy and Varoudakis ( 1996 ).

The latest General Knowledge Index report ranked Pakistan at 110 out of 132 countries. The report divulges the Pakistan score as 34.4 against the world average score of 46.5. The ranking and average show that Pakistan has below the average score. Similarly, the innovation index ranked Pakistan at 87 out of 132 countries.

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Rahman, A., Khan, M.A. The Relationship Between Financial Development and Economic Growth: New Insights Using Quadruple and Quintuple Helix Innovation Framework and Way Forward. J Knowl Econ (2023). https://doi.org/10.1007/s13132-023-01276-y

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Published: 05 April 2024

Greenfield investment and job creation in Ghana: a sectorial analysis and geopolitical implications of Chinese investments

Daniel Assamah ORCID: orcid.org/0000-0002-6624-592X 1 &
Shaoyu Yuan ORCID: orcid.org/0000-0002-4702-8786 2

Humanities and Social Sciences Communications volume 11 , Article number: 487 ( 2024 ) Cite this article

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Politics and international relations

Multinational investment has attracted mixed reactions from scholars and policymakers concerning their role and impact on job creation in host countries, particularly in developing economies. Using Ghana as a case study, this paper examines the impact of Greenfield investment on job creation. Proponents of multinational corporations (MNCs) argue that foreign direct investment (FDI) leads to economic growth, creates technological spillover, increases exports, and creates jobs, among other benefits. This has encouraged developing economies to adopt developmental strategies around MNC activities. Although most researchers have analyzed the impact of FDI on job creation, the unanswered question is: Does greenfield investment in Ghana lead to significant job creation in the formal sector? Extant literature considers FDI monolithic, without adequately differentiating between Green and Brownfield investments. Using granular data from the FDI Markets, this research paper fills this gap by empirically analyzing the Greenfield investment by 386 multinational companies in Ghana from 2003 to September 2020. Over the specified year range, these companies engaged in 500 projects across Ghana. Adopting the ordinary least square analysis (OLS), the study demonstrates that Greenfield investment has a statistically significant and positive impact on job creation in Ghana. Out of the 31 sectors, only the following sectors contribute significantly to job creation through Greenfield investment in Ghana: Consumer Products, Food & Beverage, Industrial Equipment, and Non-automotive transport OEM. This paper contributes to a better understanding of how government investment in fixed assets (GCF) such as roads, railways, and industrial buildings in the local economy should be managed efficiently so as not to spur inflation, which correlates negatively with jobs. Finally, this paper analyzes Chinese investments in Ghana, comparing them with U.S. investments, and examining their broader geopolitical implications, which highlights the importance of aligning foreign investments with national development strategies and adhering to international norms and standards.

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Tao Liu & Yue Li

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Fengxiao Gong & Hui Chen

Introduction

As Bhagwati ( 2007 ) rightly stated, “…there is a fierce debate between those who consider multinationals to be a malign influence and those who find them to be a benign force” (p. 163). Considering the growth of multinational corporations (MNCs) in size, global influence, revenues, and technical operations, compared to nation-states, MNCs’ activities are often associated with growth and development. Gilpin and Gilpin also acknowledged that “the world’s largest MNCs account for approximately four-fifths of world industrial output while typically employing two-thirds of their workforce at home” ( 2001 , p. 289). Thus, some of the positive effects of multinational activities on a host country’s economy include productivity and technology spillover, exports, employment, and economic growth, as was emphasized by the United Nations during its International Conference on Financing for Development in Mexico in 2002.

“Private international capital flows, particularly foreign direct investment…are vital complements to national and international development efforts. Foreign direct investment contributes toward financing sustained economic growth over the long term. It is especially important for its potential to transfer knowledge and technology, create jobs, boost overall productivity, enhance competitiveness, and ultimately eradicate poverty through economic growth and development” (U.N., 2002 , p. 5).

Therefore, multinational corporations (MNCs) foreign direct investment (FDI) serves as a development strategy for most developing economies (Osei, 2019 ). FDI from MNCs leads to employment opportunities by directly hiring local workers in their subsidiaries. It also creates indirect employment through links with local suppliers or affiliates who are attracted to the market. Finally, MNCs contribute to higher income in the host country through the multiplier effect (Vacaflores et al., 2017 ). Hence for host countries particularly in Africa, attracting MNCs serves as an economic instrument for growth and development (Assamah and Yuan, 2023 ).

Ghana, commissioned as the secretariat of the African Continental Free Trade Area (AFCFTA), adds to the significance of this research as the trade agreement will enhance access by multinationals on the continent, particularly in Ghana. The impact at the household and corporate levels will be significant. By 2030, “the fully integrated market of 1.7 billion people will have an estimated $6.7 trillion of combined consumer and business spending” on the African continent (Fofack, 2020 ). Although Ghana is not a traditional FDI destination in Africa, its past decade of economic growth and political stability has enabled the country to attract significant FDI over the past couple of years. According to the fDi 2020 report, “Ghana entered the top 10 destinations by number of FDI projects in the Middle East and Africa,” a 56 percent increase from 2018 (fDi Report, 2020 , p. 21). Therefore, as investors seek opportunities on the continent for profit, to what extent does that generate employment opportunities for Ghanaians?

Regarding sectoral and industry analysis, the data unveils the following sectors as having a significant impact on the Ghanaian economy regarding job creation: Automotive OEM, Building materials, Business machines, Consumer Products, Food & Beverages, Metals, and Textiles. Sectors such as Healthcare, Industrial Equipment, and Electronic Components do not significantly impact Ghana’s job creation. We recognize that most Chinese companies invest in the Automotive OEM sector and Business machines and equipment. In contrast, the U.S. companies focus more on the Food & Beverage, Metal sector, Healthcare, software, and I.T. services.

Literature review

The presence of MNCs in Ghana can be traced back to the colonial era when companies such as United Trading Company (UTC), Paterson and Zochonis (P.Z.), Kingsway, Lever Brothers (Unilever), and the United African Company (UAC) entered the Ghanaian market, with some still operating today (Williams et al., 2017 ). After independence, Ghana’s effort to attract foreign investment has been attributed to the following reasons: (1) the country has enormous natural resources but lacks the capital and technology to explore them efficiently, (2) the economy is mainly dependent on agricultural products as its primary export commodity, (3) the economy is overly dependent on the importation of goods and services (Dagbanja, 2014 ). This has led to enacting domestic laws and national policies to promote the flow of capital investment. The first legislation enacted after Ghana’s independence was the Capital Investment Act (Act 179) in 1963 to promote and protect foreign investment (Dagbanja, 2014 ). Subsequently, policies such as the Economic Recovery Program (ERP) were initiated in 1983 by the Ghanaian government to support the World Bank and the International Monetary Fund (IMF).

Adopting a market-oriented approach, the ERP liberalized the external sector and significantly reduced the macroeconomic imbalances (IMF). The country’s balance of payment registered a sizeable overall surplus throughout that period. However, the Structural Adjustment Program reform slowed economic growth, hampering private investment, export growth, and economic growth. The government’s quest to create an enabling legal environment to attract FDI led to the enactment of the investment code, Ghana Investment Promotion Center (GIPC) Act in 1994 (Act 478) (Abor and Harvey, 2008 ). Tables 1 summarize the various legislatures enacted since independence, outlining their primary purpose and significant accomplishments. Table 2 provides a description of the variables.

Available data shows that between September 1994 and June 2002, the Ghana Investment Promotion Center registered 1309 FDI projects, with 388 in the service sector, 368 in manufacturing, 153 in tourism, 106 in building and construction, 105 in agriculture, and 91 in export trade. These FDI sources include Great Britain, India, China, the USA, Lebanon, Germany, Italy, Switzerland, Netherlands, Canada, France, South Africa, Nigeria, and Malaysia.

Regarding employment opportunities in Ghana, FDI “has had direct and multiplier effects on the level of employment, its quality, and the skills of the labor force” (Fu, 2020 p. 52). Although it has not contributed to labor-intensive activities in some sectors, such as the mining sector, due to capital-intensive production, these regions are training their labor force with specific engineering and management skills to make them relevant in other sectors and high-paying jobs outside the mining sector.

An empirical study by Osei ( 2019 ) shows that for every 1 percentage increase in FDI in Ghana, it led to a 3 percent growth in employment between the years 2000 and 2016. This study identifies some critical factors influencing FDI’s impact on employment within the Ghanaian economy, including wage structure, investment freedom, and the nature of the subsectors. This study is consistent with other authors who found that FDI has a positive and significant impact on employment in Ghana (Ato-Mensah and Long, 2021 ; Awunyo-Vitor and Sackey, 2018 ). However, these scholars found that FDI does not affect Ghanaian employment in the short run but rather affects economic growth and, ultimately, employment and poverty reduction (Obeng-Amponsah and Owusu, 2023 ; Tee et al., 2017 ).

In terms of the source countries of these FDI, Boakye-Gyasi and Li ( 2017 ) argue that in the case of Ghana, MNCs from China, India, the USA, and South Africa have significantly contributed to positively shifting the Ghanaian economy. However, the relative impact of these countries on the Ghanaian labor market is sector-bound. Chinese companies have had a significant impact on the Ghanaian manufacturing sector, investing in the plastic industry, steel, construction materials, paper, and artificial hair wigs (Brautigam et al., 2018 ). Companies from the USA and South Africa focus more on both the Agricultural and Service sectors, while Indian MNCs employ more Ghanaians in the Agricultural sector (Boakye-Gyasi and Li, 2015 ).

According to Yeboah and Anning ( 2020 ), between 2013 and 2018, about 85% of the employment opportunities created by these MNCs were for Ghanaians. Without strong government policies, these positive impacts of FDI on employment in Ghana would not have been possible, especially in the case of Ghana (Boakye-Gyasi and Li, 2015 ). Table 1 shows the significant investment laws enacted by the Ghanaian parliament since 1963, along with a brief description of their objectives.

Regarding government institutions and policies, some researchers have associated a positive relationship between foreign direct investment (FDI) and host country governance, linking good governance with higher FDI inflows (Liou et al., 2016 ; Du et al., 2008 ). However, Fon and Alon ( 2022 ) argue that FDI from Chinese state-owned enterprises flows more to African countries with weak institutions. They suggest these enterprises can leverage good China-Africa diplomatic ties to avoid the potential seizure of their assets in weakly governed countries.

Role of multinational corporations (MNCs) in developing economies

Since the mid-1980s, many developing countries have opened their economies to FDI inflow (Nunnenkamp, 2004 ). Several factors explain this liberalization wave; developing countries welcomed these multinational corporations as “social and cultural change agents” (Meleka, 1985 p. 37). They believed that by opening to multinationals, they could emulate the Western ways. Nevertheless, this enabled these MNCs to operate in environments limited by regulations and restrictions. According to Dijk and Marcussen ( 1990 ), the focus of multilateral institutions on infrastructural development in developing countries after the Second World War led to promoting the structural adjustment programs (SAP) that mandated third-world countries to open their economies to trade. SAP discouraged public sector and state involvement in industrial development while promoting exports and the private sector. The significant policy shift among developing countries from import substitution to outward-looking can also be attributed to the inefficiencies associated with import substitution, the success of the newly industrialized economies (NIEs), which were export-led, and increased global production (Lall and Narula, 2004 ).

Has this openness in the economy led to poverty alleviation and better opportunities through FDI inflows? Researchers and policymakers have mixed evidence regarding the role of MNCs in developing countries. Bhagwati ( 2007 ), however, emphasized that the scientific analysis of trade effects on poverty is very compelling and supports MNCs’ argument. This trade effect on poverty is based on a two-step argument, “trade enhances growth, and that growth reduces

poverty” (Bhagwati, 2007 , p. 53). As Cohen ( 2007 ) argues through research conducted by the McKinsey Global Institute, FDI also leads to improved living standards. Because of MNCs’ value for skilled labor and their use of pollution abatement equipment, Cohen ( 2007 ) added that they create socio-economic conditions that lead to improved human rights and environmental quality in developing economies. Sen ( 1999 ) will consider this improvement as a reduction in poverty as it enhances human freedom. Neal’s ( 1994 ) insightful contribution acknowledged that MNCs investment in developing economies not only creates jobs and improves earnings but more so opens oppressive regimes and subversive cultures to the global market such that “dictatorships are more likely to collapse, or to change, in the face of an enriched (and thereby empowered) population that has adopted the twin values of the global marketplace, consumerism, and entrepreneurialism” (p. 22). In terms of capital and state benefits, the conservative oligopolistic school claims “MNCs are of more benefit to developing states because they serve as providers of capital which may not be readily available in Africa for the exploitation of untapped resources, especially in the mining and drilling sectors”(Amusan, 2018 , p. 46).

Contrary to the benefits mentioned above regarding MNCs’ role in developing countries, some researchers argue that MNCs disregard human rights, especially in Africa. Human rights are limited mainly by the West to political and civic rights, mainly considering the freedom of speech, movement, and life (Amusan, 2018 ). As Donnelly and Whelan ( 2019 ) emphasized, if human rights impact development, then economic rights turn out to be duties to help provide for the needy. Critics assert that, due to MNCs’ corrupt nature, they like to operate in conflict areas in Africa where they can siphon resources for their benefit, underpinning why numerous oil companies are found in Sudan, South Sudan, and Nigeria (Amusan, 2018 ). Researchers like Nunnenkamp ( 2004 ) have also argued that FDI does not alleviate poverty; it instead widens the income gap by empowering skilled workers and worsening the poor’s relative income.

Bhagwati ( 2007 ), in his book chapter, Corporations: Predatory or Beneficial? Attempted to address most of the criticism against MNCs. Although he acknowledged MNCs’ political intrusion in developing economies, he added that given the rise in democracy and the age of digitization, such corrupt practices will now be difficult to hide. He further argued that it is a grievous mistake to compare MNCs’ size to the GDP of developing countries to portray developing countries as weak negotiators. Moreover, when it comes to labor rights and worker compensation, although ethical values require MNCs to uphold acceptable labor standards, it is still the host government’s responsibility to enforce labor laws.

Although FDI has a positive impact on growth in other developing countries, Nunnenkamp ( 2004 ) indicates that “it is mainly in African countries that FDI may have limited effects on economic growth and poverty alleviation” (p. 666). Nunnenkamp ( 2004 ) attributed the lack of positive effect of FDI on economic growth to FDI flow volatility in five African countries (Somalia, Gabon, Sierra Leone, the Democratic Republic of Congo, and Algeria). Others attribute the negative effect of FDI in developing economies to globalization. Nevertheless, Lall and Narula ( 2004 ) assert that the answer is simple “the removal of restrictions on FDI does not create the complementary factors that MNCs need; it only allows them to exploit existing capabilities more freely” (p. 4). The controlling strategy of MNCs in the past has made them successful at the expense of developing countries, Meleka ( 1985 ) argued. Deploying unnecessary technology, which could lead to unemployment, providing elusive and vague information about their activities, transferring profits overseas when developing countries anticipated the reinvestment of profits into the economy, and influencing the host country’s policies and politics are some of the controlling advantages exerted by MNCs in developing countries in Africa.

In summary, developing countries must understand that following the Washington consensus, which alludes to FDI flows, generates positive externalities for domestic firms; it is critical to consider the following factors to benefit from the increased FDI flow (Lall and Narula, 2004 ). For FDI to be beneficial, developing countries must grasp the competence and scope of operation of that subsidiary in their country. The role played by a subsidiary in the MNC giant network determines the nature of the FDI and the local competence they will require to achieve that. Although it is sometimes difficult to ascertain, knowing the motive of an FDI, as discussed above, is critical to determining how externalities and linkages develop. Thirdly, MNC linkages are significant if developing countries benefit through international technology spillovers, backward linkages, labor turnover, or horizontal linkages. What is important here is the host country’s technological capability, the domestic market orientation of subsidiaries, and the entry mode, whether they were established through Greenfield investment or mergers and acquisitions (M&As). Lastly, understanding the nature of the MNC assets can help host countries build appropriate absorptive capacity.

Description of variables

A dependent variable is the response measured or the presumed effect, whereas an independent variable is the manipulated variable or the presumed cause. The dependent variable used in this research is jobs created, and the independent variables are outlined in the table below.

Data structure

The dataset compiled for analysis comprises both time series and cross-sectional data merged together. The foreign direct investment (FDI) project data, including jobs and capital investment indicators, represents repeated cross-sections, with each investment project an independent observation across the June 2003 to September 2020 period. In total, the FDI data covers 500 investment projects across 386 unique firms in Ghana. This project-level FDI data does not constitute panel data. The macroeconomic control variables, including GDP, labor force participation rate, gross capital formation, inflation rate, tax burden, governance integrity, business freedom, and property rights variables are time series data. They pertain to Ghana and are measured annually from 2003 to 2020.

Hence, the compiled dataset has a mixed structure combining both time series and independent cross-sectional observations. The national-level annual indicators capture trends over time (time series data) while the individual FDI projects in each year provide separate cross-sectional data points. This combined dataset allows an assessment of how macroeconomic factors relate to firm-level FDI project activities.

Data analysis

Ordinary least squares (OLS) regressions were used to find the empirical relationship between the dependent and independent variables in the study. Due to the data distribution, different regression models were adopted to transform the data into the best linear shape. The following four equations represent the empirical models used for the analysis in this study:

The various models will be discussed in the findings and analysis session. However, using STATA version 16, the OLS regression identified the effect of a variable while controlling for the other observable differences. OLS minimizes the sum of squares between the observed sample values and the fitted values in the models.

Table 3 displays the descriptive statistics of the variables in this study. For our key variables, the average Jobs created within the year range is 197, while the average capital invested was $99 million. With a maximum of $7900 million investment in 2007 from Eni Spa, an Italian company. Table 4 displays the regression output for the four models, showing the effect of capital investment on job creation in Ghana.

Model 1 shows the untransformed bivariate regression between Greenfield investment and jobs generated by the 386 companies. From Table 4 , our model 1 equation becomes ${{{\rm {Jobs}}}}_{i}=153.4+0.445{{{\rm {Capin}}}}_{i}$ . Which means that for every $1 million increase in Greenfield investment, the expected job created in Ghana increases by 0.445. The positive coefficient is statistically significant at the 0.001 level. Although this bivariate regression shows a significant statistical result, a scatter graph of the two variables shows a nonlinear relationship (as shown by the Linear–Linear graph in Fig. 1 ). However, using the logarithmic function, the relationship between these two variables was transformed so we could fit a linear equation through the points, as displayed by the Log–Log graph in Fig. 1 . Thus, Model 2 displays this log–log function ${{{\rm {lnjob}}}}_{i}=-8.012+0.719{{{\rm {lncap}}}}_{i}$ . Which shows capital investment to be statistically significant at the 0.001 level. Since this is an elasticity model, a one percent change in capital investment predicts a 0.719 percent increase in job creation in Ghana. Although we cannot directly compare the R 2 between models 1 and 2, we realize a substantial increase in the R 2 for model 2.

This figure is a bivariate regression graph that shows a significant statistical result in which a scatter graph of the two variables shows a nonlinear relationship.

Model 3 builds on the Log–Log function by introducing economic indicators such as GDP, GCF, LFPR, and inflation rate. By controlling for these factors, the coefficient for capital investment remains statistically significant at the 0.001 level but decreased slightly by 0.8 percent compared to Model 2. Although this decrease is not massive, the coefficients for the economic indicators were all significant. GDP is statistically significant at 95 percent confidence intervals, while GCF, LFPR, and inflation are highly statistically significant at the 0.001 level. The R 2 also increased by 2 percent (0.535) compared to Model 2. The equation for model 3 becomes:

The coefficient for capital investment is interpreted as a one percent change in capital investment leading to a 0.711 percent increase in jobs while holding GDP, GCF, LFPR, and inflation constant.

Model 4 controls the effect of the rule of law, government size, and regulatory efficiency on job creation in Ghana. The effect of the rule of law was measured by introducing two indexes, government integrity, and property rights, as adopted by the Heritage Foundation. The business freedom index was used to measure the regulatory efficiency of the Ghanaian market, and the tax burden represents the government’s size. Capital investment remains statistically significant when we control the rule of law, government size, and regulatory efficiency, but GDP, GCF, LFPR, and inflation became statistically insignificant. However, this model is statistically significant in government integrity, business freedom, and property rights, while the tax burden is insignificant. Interestingly, although the rule of law indexes (government integrity and property rights) were statistically significant at the 99 percent confidence interval, they correlate negatively with jobs created through Greenfield investment in Ghana between 2003 and 2020. Only business freedom positively affects the dependent variable, and it is significant at the 95 percent confidence interval.

Finally, regarding which sectors significantly support the Ghanaian economy in terms of job creation through domestic government investment, this regression model was adopted

Sec represents the variable sector where multinationals have invested between 2003 and 2020, as classified by the fDi Market database. The interaction allows us to see the effect of GCF on the sectors and how these sectors ultimately impact our dependent variable. Out of the 32 sectors, only 13 showed a positive correlation and are statistically significant, as shown in Table 5 below, when the effect of GCF is considered on the sectors. The highly significant sectors in job creation at the 0.001 level while considering the effect of government’s investment in the local economy are Automotive OEM, Business Machines & Equipment, Consumer Products, Food & Beverages, Metals, and Textile. With an R 2 of 0.74, it implies that our independent variables explain 74 percent of the variation in the dependent variable (Jobs).

The result in this empirical paper is supported by previous studies that examined the relationship and effect of foreign direct investment on job creation in Ghana. Model 1, a linear–linear function, rejects the hypothesis that Greenfield investment does not positively and significantly impact employment. Model 2, a log–log function, also confirms the findings of model 1. Thus, examining the effect of Greenfield investment on job creation in Ghana, the bivariate models (1 and 2), with an R 2 of 0.26 and 0.52, respectively, confirm that Greenfield investment has a significant positive effect on job creation.

Introducing national economic variables in model 3 to avoid any left-out variable bias, we realized that the R 2 increased by 2 percent. This implies that governmental development plans must boost GDP and increase fixed assets in the Ghanaian economy, such as constructing roads, railways, industrial buildings, and the purchase of machinery and equipment. While making all this progress, the model warns that inflation levels must be low since it negatively correlates with jobs. As I have emphasized the importance of GCF in constructing and purchasing fixed assets, it is imperative to understand that these assets must be intended for producing goods and services. Therefore, they must be considered “produced assets” (OECD, 2022 ).

For our unrestricted model 4, we realized that the R 2 increased by 3.9 percent compared to model 2. By introducing the indexes that measure the rule of law in Ghana, regulatory efficiency, and government size, all the economic indicators introduced in model 3 became insignificant. Using the F -test, the overall significance of the independent variables was assessed, which proved significant at a p -value of 0.000; thus, we reject the null hypothesis that the coefficients are zeros. The F -test for model 3 is also very significant, which means that the independent variables together have explanatory power. However, quite interesting, model 4 alerts us of the possibility of corruption in the Ghanaian economy.

The two indexes measuring the rule of law in the country (Government Integrity and Property Rights) correlate negatively with the dependent variable and are statistically significant at 0.01. Thus, every one percent change in government integrity leads to a 5.1 decrease in jobs. At the same time, a one percent change in the protection of property rights will cause a 22 percent decrease in jobs. Although these results are intriguing, they support the claims of MNC critics who argue that MNCs investing in Africa target corrupt countries with weak institutions so they can get away with their misdemeanors. Ironically, business freedom, measured by how easy it is to start and obtain a business license in Ghana, has a positive and significant effect on job creation. This is very reasonable, as every multinational would like a quick and easy business registration process to commence operations in Ghana. The regression model indicates that every one percent change in business freedom leads to a 2.9 percent increase in job creation while controlling for the other factors. This should encourage policymakers to ensure that the process of business registration, the cost involved, and the waiting periods are reasonable to foster a good business environment.

Finally, as stated above, only 13 of the 31 sectors positively affect job creation in Ghana when the government’s investment is factored in—indicating that government investment in infrastructural development influences firms’ decisions to invest in specific sectors, thus creating labor opportunities. The government of Ghana is required to strategically extend infrastructures in communications, transportation, health, education, and utilities to various districts of the country. In order to attract MNCs into such districts or regions.

Robust check

To ensure the robustness of our regression results, we conducted checks for multicollinearity and heteroskedasticity in our OLS regression analysis. These issues are critical, as they have the potential to affect the validity and reliability of regression results, potentially leading to incorrect inferences and misinterpretations of relationships between variables (O’Brien, 2007 ). High multicollinearity makes determining the individual importance of correlated predictors difficult (O’Brien, 2007 ). Using the estat vif syntax in Stata, the variance inflation factors (VIFs) for both Models 3 and 4 showed the absence of severe multicollinearity among the predictor variables.

Additionally, the presence of heteroskedasticity can seriously distort findings and lead to erroneous conclusions in significance testing (Hayes and Cai, 2007 ). The Breusch–Pagan/Cook–-Weisberg test was utilized to test for heteroskedasticity in the residuals of our models. The results indicated potential heteroskedasticity in the data, therefore robust standard errors were calculated to account for this. While coefficient estimates remain unchanged, the robust standard errors adjust for heteroskedasticity and provide more conservative and cautious statistical inference (Hayes and Cai, 2007 ). By addressing these diagnostic tests, we enhanced the credibility of our analysis and ensured appropriate interpretation of the relationships between the variables.

Implications: Chinese investment in Ghana

China’s engagement in Africa has brought substantial assistance, particularly in infrastructure development and economic partnerships, contributing to the continent’s growth and stability. In Ghana, particularly, China’s FDI holds significant implications for the country’s economic development, bilateral relations, and regional dynamics. The influx of Chinese investments has also enhanced Ghana’s access to international markets and created opportunities for knowledge transfer and technological spillovers (Tang and Gyasi, 2012 ). However, concerns have been raised about the sustainability of Chinese-financed projects, environmental impacts, and the influx of Chinese labor in lieu of employing the local workforce. Critics argue that the lack of transparency in Chinese investments and their focus on resource extraction might exacerbate Ghana’s economic vulnerabilities and undermine long-term development objectives (Felix Ayadi et al., 2014 ). Furthermore, the growing presence of China in Ghana has the potential to reshape the region’s geopolitical landscape and recalibrate Ghana’s traditional alliances with Western countries (Tang and Gyasi, 2012 ). While the investments have fostered closer political and economic ties between China and Ghana, it is crucial for the Ghanaian government to ensure that these projects align with national development strategies, promote long-term, inclusive growth, and adhere to international norms and standards. This involves striking a balance between attracting foreign investment, safeguarding the interests of local communities and the environment, and maintaining a diversified portfolio of international partnerships.

In the discourse surrounding foreign investment, it’s crucial to distinguish between Foreign Direct Investment (FDI) and other forms of financial flows, such as developmental assistance, grants, or loans. Traditionally, FDI refers to an investment made by a firm or individual in one country into business interests located in another country, often by buying a company in the target country or expanding the operations of an existing business. While Chinese infrastructure projects, such as road constructions in Ghana, may not fit the classical definition of FDI, they represent significant capital infusion with long-term strategic interests, which have broader implications than mere infrastructural development. Similarly, while US Aid is predominantly development assistance and grants, the presence of US companies, with their extensive investments and operations in Ghana, can be likened to FDI due to their impact on the local economy and their influence over policy.

From the data, we recognize that the majority of China’s investments are spread across infrastructure, natural resources, and manufacturing sectors. As one of the major investors, China has contributed to the expansion of Ghana’s physical infrastructure, capacity building, and technological advancement, thereby playing a key role in the country’s pursuit of industrialization and economic diversification. Examining the sectors in which China invests in Ghana is crucial for several reasons, including fostering economic growth and diversification, guiding resource allocation and setting priorities, identifying social and environmental implications, understanding geopolitical considerations, and informing policy decisions. By analyzing China’s investment patterns, the Ghanaian government can develop targeted policies to promote sustainable development, allocate resources efficiently, and prioritize investments for maximum benefits, such as job creation and technology transfer. Additionally, recognizing potential social and environmental impacts allows the government and stakeholders to develop mitigation strategies and ensure investments align with national goals. Furthermore, understanding China’s broader geopolitical strategy in Africa enables Ghana to navigate international relations and balance alliances while protecting its national interests. Ultimately, this knowledge empowers the Ghanaian government to develop policies that promote responsible investment, ensure compliance with international standards, and protect the country’s long-term interests.

Infrastructure sector

China has been instrumental in bolstering the health infrastructure of many African nations. They’ve spearheaded numerous projects that include the construction of hospitals, clinics, and diagnostic centers across the continent (Yuan, 2023 ). China’s investment in Ghana’s infrastructure sector has been significant over the past few decades (Boakye-Gyasi and Li, 2016 ). This investment has been driven by several factors, including China’s desire to secure natural resources, expand its global influence, and create new markets for Chinese products and services. Additionally, Ghana’s stable political environment and relatively open market make it an attractive destination for foreign investment. China’s investment in Ghana’s infrastructure has had several positive impacts. Firstly, it has helped to improve Ghana’s transportation, energy, and telecommunications sectors, leading to better connectivity and economic growth. Secondly, it has created jobs, both directly and indirectly, contributing to poverty reduction and improved living standards. Finally, these investments have fostered stronger bilateral ties between China and Ghana, leading to increased cooperation in various sectors beyond infrastructure (Boakye-Gyasi and Li, 2015 ).

China has significantly invested in various infrastructure projects in Ghana, such as the Bui Dam, which is a hydroelectric power project on the Black Volta River with a capacity of 400 MW, providing the country with increased electricity generation capacity and energy security (Yankson et al., 2018 ). Another noteworthy project is the Atuabo Gas Processing Plant, financed by China, which enables Ghana to process its natural gas resources, offering a cleaner energy source and reducing dependency on imported fuel (Ablo and Asamoah, 2018 ). China has also contributed to the expansion of the Tema Port, one of Ghana’s primary ports, resulting in increased capacity and efficiency, ultimately promoting trade and economic growth. Furthermore, China’s investment in Ghana’s railway infrastructure includes the construction of the Tema-Akosombo railway line, connecting the Tema Port to the Volta Lake, and the planned 1400-km railway network linking key cities such as Accra, Kumasi, and Tamale to bolster trade and transportation within the country. Finally, the $2 billion Sinohydro Infrastructure Agreement signed in 2018 seeks to develop a range of infrastructure projects (Neal and Losos, 2021 ), including roads, bridges, and hospitals, in exchange for Ghana’s refined bauxite, further strengthening the collaboration between the two nations.

Natural resources sector

Another major investment from China is Ghana’s natural resources sector. If China’s investment in the infrastructure sector allows China to more easily secure access, the direct investment in natural resources lets China access and extract it (Alden and Alves, 2009 ). It fuels China’s economic growth and fosters strategic partnerships. For Ghana, the investment helps Ghana better develop and exploit its resources, leading to economic growth and job creation. It also strengthens the bilateral relationship between China and Ghana, leading to increased cooperation in various sectors. It also allows China to secure a stable supply of critical resources to sustain its rapidly growing economy.

Chinese investments in Ghana’s natural resources sector have been significant across various industries. In 2010, the China National Offshore Oil Corporation (CNOOC) acquired a 40% stake in the Jubilee oil field for $1.4 billion, granting China access to Ghana’s oil resources while enabling Ghana to develop its oil industry (Hardus, 2014 ). Additionally, China National Offshore Oil Corporation’s (CNOOC) investment in the Sankofa Gas Project in Ghana is a perfect example. The Sankofa Gas Project is a deep-water natural gas field located off the coast of Ghana (Morgan et al., 2021 ). In 2013, CNOOC acquired a stake in the Sankofa Gas Project through a partnership with Italian energy company Eni and Ghana’s state-owned oil company, Ghana National Petroleum Corporation (GNPC). The project is aimed at producing natural gas for Ghana’s domestic market, as well as exporting a portion of the gas to China. This investment not only provided financial and technical support for Ghana’s energy sector but also secured a stable supply of natural gas for China, which is a critical resource for its rapidly growing economy. Another notable agreement between the two nations is the 2018 Sinohydro deal, as previously mentioned, which exchanged $2 billion worth of Ghana’s refined bauxite for Chinese-financed infrastructure projects, allowing Ghana to develop its bauxite resources while China secured a long-term supply of this crucial aluminum production component (Neal and Losos, 2021 ). Lastly, Chinese companies have significantly invested in Ghana’s timber sector, contributing to the growth of the forestry industry and increasing trade between the two countries.

Manufacturing sector

The third largest investment from China to Ghana is the country’s manufacturing sector. Investing in manufacturing supports Ghana’s industrialization efforts, leading to economic growth, job creation, and technological transfer. Like the previous two sectors, it also strengthens the bilateral relationship between China and Ghana, promoting further cooperation in various sectors. Most importantly, it allows Chinese companies to establish a presence in Africa and access new markets, reducing their reliance on domestic and traditional export markets (Amanor and Chichava, 2016 ).

Chinese investments in Ghana’s manufacturing sector have significantly impacted various industries. For example, Twyford Ceramics, a subsidiary of Sunda International, established a $77 million ceramic tile manufacturing factory in 2016, creating jobs and providing affordable tiles to the local market (Xia, 2021 ). In the steel industry, Sentuo Steel has invested over $80 million in a steel plant, bolstering the local steel industry, creating jobs, and supplying raw materials for Ghana’s construction sector (Tang, 2018 ). Another example of China investing in Ghana’s manufacturing sector is the establishment of the eastern industrial zone (EIZ) in the Tema Free Zone, near the capital city of Accra. The EIZ is a joint project between the Ghanaian government and private Chinese investors, including the China–Africa Development Fund (CADFund) and the Tianjin TEDA Investment Holding (António and Ma, 2015 ). Launched in 2012, the Eastern Industrial Zone is designed to host a variety of manufacturing industries, such as electronics, textiles, pharmaceuticals, and food processing. These investments not only create employment opportunities for the local workforce but also help enhance Ghana’s industrial capabilities through the transfer of technology and expertise from Chinese companies. Furthermore, the EIZ allows Chinese companies to establish a presence in Africa, access new markets, and reduce their reliance on domestic and traditional export markets.

In conclusion, China’s investments in Ghana across various sectors, including infrastructure, natural resources, and manufacturing, have significantly impacted both countries. These investments are driven by China’s desire to secure essential resources, expand its global influence, access new markets, and diversify its manufacturing base. By investing in Ghana’s key industries, China has contributed to the nation’s economic growth, job creation, and technological transfer while simultaneously benefiting from access to valuable resources and new markets. These collaborations have not only strengthened the bilateral relationship between China and Ghana but have also set the stage for increased cooperation and shared prosperity in the future. China’s investments in Ghana and other African countries have substantial implications for international relations, contributing to shifting global power dynamics as China challenges the traditional dominance of Western powers. This economic interdependence fosters closer ties and mutual interests, while also increasing China’s diplomatic influence and soft power projection. Additionally, China’s investment strategy offers an alternative development model that emphasizes infrastructure, resource extraction, and manufacturing, promoting regional integration and increased trade among African nations. It is also important to note that China’s investment recently often comes with assertive diplomatic rhetoric, highlighting its position as a responsible player on the global stage, while also pointing out the deficiencies of other countries when assisting other countries (Yuan, 2023 ). As China continues to expand its global presence, the evolving relationships between China and countries like Ghana will significantly impact the international political and economic landscape in the years to come.

The difference between U.S. investment in Ghana and China’s investments in Ghana is often centered on infrastructure, agriculture, health, education, and good governance. The U.S. prioritizes sustainable development, capacity building, and human rights in its investment strategy. Examples include the Millennium Challenge Corporation (MCC) compacts, USAID programs, and the Power Africa Initiative. On the other hand, China’s investments in Ghana mainly focus on infrastructure, natural resources, and manufacturing. Chinese investments are often directed towards large-scale projects like ports, railways, roads, and resource extraction facilities, aiming to facilitate trade and secure access to resources for China’s growing economy.

U.S. investments in Ghana often involve grants, aid programs, and technical assistance through agencies like USAID and the MCC. These investments usually have a more explicit focus on poverty reduction, capacity building, and sustainable development. China’s investments in Ghana are typically structured as loans, with some tied to resource-for-infrastructure deals, such as the Sinohydro Agreement (Neal and Losos, 2021 ). China often provides financing through state-owned banks and institutions, such as the China Development Bank and the Export–Import Bank of China. U.S. investments in Ghana are part of broader diplomatic efforts to promote democracy, human rights, and the rule of law, which contribute to the projection of American values and soft power. China’s investments in Ghana are part of its broader diplomatic strategy to expand its global influence, strengthen its position as a global power and establish an upstanding international image (Yuan, 2023 ), and secure access to resources needed for its domestic growth. It is important to know that China’s soft power projection in Ghana also includes cultural exchanges, scholarships, and Confucius Institutes.

In summary, the main differences between the U.S. and China’s investments in Ghana lie in their focus areas, development approaches, financing mechanisms, and soft power and diplomatic goals. While both countries seek to foster economic growth and strengthen bilateral ties, their investment strategies and priorities reflect their distinct national interests and development philosophies.

In conclusion, this paper sheds light on the impact of Greenfield investment on job creation in developing economies, using Ghana as a case study. The study demonstrates that Greenfield investment by multinational companies positively contributes to job creation in Ghana, with significant effects in the Consumer Products, Food & Beverage, Industrial Equipment, and Non-automotive transport OEM sectors. These findings underline the importance of differentiating between Greenfield and Brownfield investments when analyzing the impacts of FDI on job creation.

The research also emphasizes the need for efficient management of government investment in fixed assets to avoid spurring inflation, which negatively correlates with job creation. Chinese investments in Ghana have played a significant role in the country’s economic development and have had notable implications on bilateral relations, regional dynamics, and international markets. China’s investments, which predominantly focus on infrastructure, natural resources, and manufacturing sectors, have promoted economic growth, job creation, and technology transfer in Ghana. However, concerns regarding the sustainability of Chinese-financed projects, environmental impacts, and the lack of transparency in their investments call for a careful assessment of these collaborations. Ultimately, fostering responsible investment, compliance with international standards, and safeguarding the country’s long-term interests will be crucial as Ghana continues to benefit from foreign investments, particularly from China. The evolving relationships between China and countries like Ghana will significantly impact the global political and economic landscape, making it essential for stakeholders to address challenges and harness opportunities that arise from these collaborations.

Data availability

The data that support the findings of this study are available from the corresponding author, SY, upon reasonable request.

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Assamah, D., Yuan, S. Greenfield investment and job creation in Ghana: a sectorial analysis and geopolitical implications of Chinese investments. Humanit Soc Sci Commun 11 , 487 (2024). https://doi.org/10.1057/s41599-024-02789-w

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Transit-oriented development has emerged as a promising urban planning approach to address the challenges of urbanisation, congestion, and sustainability. The importance of transportation infrastructure, land-use policies, economic incentives, community engagement, and regulatory frameworks are essential precursors to fostering TOD. The interplay between these precursors is explored in various urban contexts, revealing the complex and context-sensitive nature of TOD implementation.

In the face of rapid urbanisation, escalating congestion, and the pressing need for sustainable urban development, the concept of transit-oriented development (TOD) has emerged as a pivotal paradigm for shaping modern cities (Ibraeva et al 2020). The inherent potential of TOD to foster efficient transportation systems, encourage compact urban growth, and promote environmentally conscious living has spurred its widespread adoption by planners, policymakers, and urban designers (Litman 2002). However, while the benefits of TOD are well-documented, its successful implementation remains contingent on an array of precursors that collectively determines its viability and efficacy within a given urban context.

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