Ashley, great post and questions! The article you linked to covers the live/work art space developments well here in Michigan (There is another called Art Works of Muskegon, MI).
Live/work art space helps a community identify to the "outside world" what they believe in. Live/work space stands for creativity, diversity, openness, tolerance, talent and innovation. This is everything that R. Florida cites as "key" for 21st. Cent. economic development. Given the many new projects in Michigan, it seems many agree with Florida. These developments can in fact draw the creative class and produce economic growth.
As far as the hard core empirical data, Prof. Ann Markusen of the U of MN-T.C. has fantastic research on the economic impact of both artists and artists' centers. See: www.hhh.umn.edu/projects/prie/index.html (Under Arts Economy Initiative).
"The Artistic Dividend" (2003) finds the economic contributions artists make to a regions economy.
Every city in Michigan should seriously consider generating live/work art space. The first Cool Cities Initiative was in the Heartside Neighborhood sponsored with Dwelling Place, Inc.; the Martineau Apartment bldg. Also, in G.R. are many new live work art studios along Division Ave. A detailed article about this project is in the Nov. 2007 Grand Rapids Magazine, titled "Miracle on Division Avenue".
Both these projects are having positive effects on redevelopment in that area of the city...new schools, apartments and shops are opening up. Anyone who has opportunity should check it out.
If we can go so far as to look at Douglas and Saugatuck, it seems that wherever art and cultural turn up as major influences as to why people live where they live, economic prosperity follows....so much so that sometimes the artists can't afford the very places they regenerated! -See Minneapolis Warehouse District circa 1990's.
All things that stir the mysterious, beauty and the imagination are priceless!
The question I believe becomes does it require stick and brick space and money or is it as simple as real passion, courage and playful imagination to change our economy?