Agglomeration Potential: The Spatial Scale of Industry Linkages in the Southern California Economy

ABSTRACT Targeting industry clusters for economic development has become popular despite the lack of empirical evidence about the spatial scales over which various clusters agglomerate. This paper identifies twenty manufacturing industry clusters from a principal components analysis of interindustry patterns of trade and measures the spatial employment concentration of each cluster's plants within a polycentric framework. Two to eight centers of employment concentration are detected within the Southern California region for each set of trade linkages. Our spatial half‐life measure reveals that half of a cluster's employment in associated establishments is located within a typical range of eight to twelve kilometers (about 5–7.5 miles) to the nearest employment center or subcenter for the particular cluster. Furthermore, employment in seventeen of the twenty clusters is found to be more spatially concentrated than manufacturing employment as a whole, suggesting that geographic proximity is important to interindustry linkages in the Southern California economy. More important, the spatial concentration across industry clusters varies considerably within the metropolitan area, implying that economic development practitioners should consider local context and adapt industry cluster theories to the specific advantages and disadvantages of their immediate locality.     

Integrating Economic Base Theory with Regional Adjustment Models: The Nonmetropolitan Rocky Mountain West

ABSTRACT Interest in the use of adjustment models has recently increased as analysts have come to see the value of these models in the study of regional growth processes. Adjustment models are especially useful in clarifying the nature and direction of population-employment interactions. However, other models of regional growth suggest that employment should not be treated as a single homogeneous variable, as is the usual assumption in regional adjustment models. This paper looks at the issue of employment disaggregation, and suggests that adjustment models can be alternatively specified by making use of economic base theory to separate employment into at least two broad sectors. Alternative economic base specifications are tested using data for the nonmetropolitan counties (n=254) of the US. Rocky Mountain West during a recent time period. The results show that an economic base version of the adjustment model provides insights to regional change that are not available from the traditional version of the model.     

Productivity Change in Manufacturing Regions: A Multifactor/Shift-Share Approach

ABSTRACT The traditional shift-share model measures the combined effects of output growth and productivity change on employment. A region with above average employment growth either has a favorable industry mix or enjoys a competitive advantage over other regions. To separate the effects of output and productivity, the shift-share model is extended to decompose the effects of changes in output and productivity on employment. This paper modifies the Rigby-Anderson extension by separating the contribution of labor and capital to productivity growth in the analysis of regional economic performance, and investigates twenty (two-digit SIC) manufacturing sectors in twelve states (six snowbelt, six sunbelt states) to assess whether observed changes in employment were due to changes in output or to productivity.     

Natural Amenities and Rural Development: Understanding Spatial and Distributional Attributes

ABSTRACT Contemporary resource management practice and rural development planning increasingly emphasize the integration of resource extractive industries with non‐market‐based recreational and amenity values. There is a growing empirical literature which suggests that natural amenities impact regional economies through aggregate measures of economic performance such as population, income, and/or employment growth, and housing development. We maintain that assessing the developmental aspects of amenity‐led regional change requires a more thorough focus on alternative measures of economic performance such as income distribution and spatial organization. In the applied research presented here we investigate relationships between amenities and regional economic development indicators. Results suggest mixed and generally insignificant amenity‐based associations which highlight the need for appropriate regional economic modeling techniques that account for often dramatic spatial autocorrelation of natural amenity attributes. We conclude that with respect to amenity driven economic growth and development “place in space” matters.     

Dynamic Shift-Share Analysis

Most applications of shift-share analysis to regional employment change have used a study period of several years and have examined conditions only at the beginning and end years. This comparative static approach does not take into account the continuous changes in both industrial mix and size of total employment of the region over the study period. Calculating the national growth effect, the industrial mix effect, and the competitive effect on an annual basis and then summing the results over the study period provides a more accurate allocation of job changes among the three shift-share effects. This approach, which we term dynamic shift-share analysis, also allows unusual years and years of economic transition to he identified. We illustrate the use of dynamic shift-share by presenting results of an analysis of New England employment growth from 1939 to 1984, using U.S. Bureau of Labor Statistics data. The use of the dynamic form of shift-share is important when the study period is characterized by either large changes in regional industrial mix or major differences between regional and national growth rates.     

Interindustry Employment Requirements in Nonmetropolitan Communities

Interindustry employment requirements are examined in nonmetropolitan communities ranging in population size between 1,000 and 15,000. A ten-sector economic base model is first used to estimate the demand for nonbasic employment in five different functional types of communities. A new and improved method for community impact assessment is then outlined. Here a distance-weighting procedure is applied to the various type-specific estimates of nonbasic employment so that a composite employment requirements matrix can be calculated for any study community. Finally, postimpact interindustry requirements are decomposed into two effects: preimpact employment requirements plus nonbasic employment shifts reflecting structural change. All estimates and findings are based on the Arizona Community Data Set.     

Changing Employment Profiles and Growth: An Economic Base Study of Florida Counties (1982–1987)

Location Quotients are used to estimate economic base multipliers for two-digit Standard Industrial Classification employment data at the county level for the state of Florida. Changes in multipliers are contrasted to changes in county employment profiles and demographic trends for the period 1982 to 1987. Counties are then classified by employment and growth characteristics. A cross-sectional econometric model is constructed to explain regional shifts in total employment. It is demonstrated that although the Florida economy is supported by a low level of employment activity in primary and secondary sectors (relative to the tertiary sector), these sectors tend to be very important in explaining variations in regional economic growth. The empirical findings suggest that the alleged service-oriented economy of Florida is still reliant upon export-oriented activity as the catalyst for employment expansion.     

Change in the Concentration of Employment in Computer Services: Spatial Estimation at the U.S. Metro County Level

ABSTRACT This article models the concentration of computer services activity across the U.S. with factors that incorporate spatial relationships. Specifically, we enhance the standard home‐area study with an analysis that allows conditions in neighboring counties to affect the concentration of employment in the home county. We use county‐level data for metropolitan areas between 1990 and 1997. To measure change in employment concentration, we use the change in location quotients for SIC 737, which captures employment concentration changes caused by both the number of firms and the scale of their activity relative to the national average. After controlling for local demand for computer services, our results support the importance of the presence of a qualified labor supply, interindustry linkages, proximity to a major airport, and spatial processes in explaining changes in computer services employment concentration, finding little support for the influence of cost factors. Our enhanced model reveals interjurisdictional relationships among these metro counties that could not be captured with standard estimates by state, metropolitan statistical area (MSA), or county. Using counties within MSAs, therefore, provides more general results than case studies but still allows measurement of local interactions.     

Regional Growth Dynamics in the Service Sector: The Determinants of Employment Change in UK Regions, 1971–2005

There is a need to better understand the dynamics relating to the evolving economic structure of regions, in particular factors concerning deindustrialisation and the growth of services. In order to unpick the dynamics relating to contemporary regional evolution, this paper examines regional employment in the UK's services sectors from 1971 to 2005. The analysis utilises the statistical technique of multi‐factor partitioning to examine the evolutionary dynamics of employment change in the UK service sector. Overall, differing growth trajectories in services employment across regions appear to be the result of the different underlying industrial structures observed within the regions themselves. The findings indicate that the industrial structure of a region has a significant influence on employment change in services, with related variety being of greater consequence than specialisation. This suggests that diversity, or urbanisation, effects have a greater influence than specialisation effects on “lighter” industries than “heavier” industries. Spatio‐temporal variations within the development of services are evident in the analysis, and there is evidence of convergence across the regions for all sub‐sectors examined. It concludes that in an increasingly services‐dominated economy, diversity and related variety have some weight in explaining regional development paths.     

On the Value of Homotheticity in the Shift-Share Framework

The purpose of this paper is to examine the usefulness of homothetic reformulations of the shift-share accounting model to the practitioner of regional growth studies. The reformulations of Esteban-Marquillas (1972) and Arcelus (1984) are examined to determine if they improve the shift-share framework as a means for accounting for regional economic growth or decline. The purpose of the homothetic models is to separate out change in a region's employment (or value added) associated with its prior or base year specialization in particular industries from change associated with changes in the mix of industries that occurred during the period under study. It is contended while the resulting accounts may help in understanding individual industry's growth rates, they shed little light on total regional growth. Indiana employment data from 1977 and 1986 are used to illustrate the arguments.     

Global Markets and the Role of Geographical Proximity in Mexico's Employment Growth

In the context of greater economic integration with global markets and structural economic reforms, this paper analyses regional and sectoral employment growth dynamics in Mexican states between 2004 and 2014. The methodology is based on spatial shift‐share analysis that explicitly considers interregional interactions in employment while assessing potential spillover effects arising from spatial interactions among states and industrial sectors. The results suggest a competitive effect from some industries—such as those related to science and specialized suppliers, intensive scale industries and dominated providers—which led to the formation of industrial corridors of neighboring states that connect the central region with the northeast region of the country. It was also found that proximity to states such as Nuevo Leon, Queretaro, Guanajuato, San Luis Potosi, and Puebla has positively influenced neighboring states in terms of employment growth rates. The results also support the argument of some sort of de‐concentration of economic activity in the capital, Mexico City, toward neighboring states.     

Incubating an Illusion? Long‐Term Incubator Firm Performance after Graduation

Local economic development policies worldwide perceive business incubation as an effective measure to promote regional growth through the support of young and innovative ventures. The common assumption is that incubation promotes firm growth, in particular after these firms graduated from their incubator organisations. However, knowledge regarding the performance of incubated ventures after they have (successfully) completed their incubation is almost non‐existent. This article investigates the long‐term development of 324 graduate firms from five German business incubators (incubated between 1990 and 2006). The present study does not suffer from a survivor bias, meaning that performance data of non‐surviving firms is also included. Using employment and sales measures as performance indicators, this study contradicts existing results with regard to long‐term graduate performance. Findings of this paper do not support the presumption of sustainable and strong firm growth beyond incubation.     

Regional Innovation Systems: Implications for Nonmetropolitan Areas and Workers in the South

ABSTRACT A public policy response to global competition is the creation of a geographic concentration of innovative activity (regional innovation systems [RIS]) that will enhance metropolitan economic development through knowledge spillovers, product development, and new firm spin‐offs. This article identifies three types of RIS in the thirteen southern states based on a cluster analysis of twenty indicators of innovative and entrepreneurial activity. Next, regression analysis is used to determine if the 1990–2000 growth rates of nonmetro county population, employment, and earnings were related to proximity to an RIS after controlling for other county characteristics associated with local economic development. The research findings indicate that nonmetro counties near an RIS experienced more rapid population and employment growth; however, changes in nonmetro growth rates varied by type of regional innovation system. In addition, proximity to an RIS had a stronger impact on nonmetro population change than on nonmetro job growth.     

Spatial Clusters in EU Productivity Growth

In the last year, a central issue in regional economic growth debate has been represented by the empirical analysis of Verdoorn's law related to the long‐term dynamic relationship between the rate of growth in output and the productivity growth due to increasing returns. Several papers have tested Verdoorn's law on European countries as well as many other world economies. Recently, attempts have been made to provide foundations for a spatial version of the original law specification. The main contributions were dedicated to the inclusion of spatial dependence in the economic model. Surprisingly, in the literature on Verdoom's law the analysis of the spatial heterogeneity is not often considered. The aim of this paper is the regional analysis of the spatial dependence and heterogeneity in Verdoorn's law, identifying spatial regimes that can be interpreted as clusters of productivity growth in European regions at NUTS 2 level. To pursue this objective, an optimization algorithm for the identification of groups is used. This constitutes a modified version of Simulated Annealing.     

The elusive quest for balanced regional growth from Barlow to Brexit: Lessons from partitioning regional employment growth in Great Britain

The British Government’s economic strategy for post‐Brexit Britain of achieving balanced regional growth by “driving growth across the whole country” echoes the objectives set by the Barlow Report of 1940. The regional policies that followed the Barlow Report were heavily influenced by papers written for the Commission by G D A (later Sir Donald) MacDougall. The first of these papers was included as an appendix to the report itself and introduced the shift‐share methodology to the analysis of regional employment growth, and subsequently shown to be flawed. The second paper considered the urban hierarchy and growth but was never fully developed. Consequently post‐war regional policy focussed on the contribution of industrial structure to employment growth without fully taking into account the urban hierarchy or regional locations of that employment. This article replaces the flawed shift‐share methodology with multifactor partitioning (MFP) and applies it to regional employment growth for the period 1971‐2012, a span of special interest because it largely coincides with British membership of the European Union (EU). The deficiencies in the second paper are addressed by introducing allometry to measure the employment growth of each region relative to that of Great Britain and then regression analysis to relate the allometries to distance from London. The results of the two sets of analyses highlight the need for a multiple‐factor, comprehensive, and integrated approach to regional policy and provide a benchmark against which to gauge the success of Britain's post‐Brexit policy of driving future growth across the whole country.     

State Infrastructure and the Geography of Employment

ABSTRACT The effects of state public capital investment on economic growth is an important question that has been the focus of a recent substantial research effort. But the majority of this research has ignored these investments’influence on the intra-state pattern of economic activity. Yet if external agglomeration economies are important determinants of growth, then investments may indirectly affect growth by fostering or discouraging agglomeration. This paper discusses the effect of state infrastructure investments on the distribution of employment within states and the implications of these spatial effects for aggregate state employment growth. Preliminary empirical results suggest that state infrastructure investments tend to redistribute growth from areas of dense employment to other parts of the state. This redistribution may diminish agglomeration benefits offered by cities, which has the potential to reduce state growth. The paper concludes with a discussion of implications of the work for research and policy.     

Integrating Firm Dynamics into the Shift‐Share Framework

ABSTRACT This article integrates firm birth and death data into a shift‐share analysis framework. The proposed methodology can be used when data availability does not allow for the direct association of employment changes to business demographics at the regional level. It may be also used as an exploratory step before any explanatory econometric work is undertaken as a means of identifying classes of potential control variables. Applying the method to Greek data suggests that firm‐size heterogeneity should not be ignored, that local conditions matter more than regional economic structure, and that the latter are asymmetrical across sectors when it comes to the effects of business demographics on regional employment or output growth.     

Effects of World Demand and Competitiveness on Exports and Economic Growth

ABSTRACT There is little consensus in the development literature on whether it is supply explanations such as competitiveness levels, or, the external demand structure which drive the link between exports and economic growth. This paper attempts to reconcile the polarization of the aforementioned viewpoints by examining the effects of both world demand and a country's competitiveness in exports on the relationship between export growth and economic growth. The results indicate that only developing countries which are highly competitive and which also face relatively favorable external demand for their exports experience above-average growth. Weak external demand reduces the positive effects of exports on growth substantially but may be offset by high levels of competitiveness in trade. The results imply that both regional and Third World growth studies on the link between exports and economic growth would profit more from integrating both supply as well as external demand explanations rather than succumb to one of the two viewpoints.     

What matters for lagging regions? The role of self-employment and industrial diversity in distressed areas

Previous research suggests that having more self-employed or entrepreneurs can contribute to higher levels of economic growth in distressed areas. Additionally, self-employment in certain industries may be more beneficial to growth. Other research has linked industrial diversity to entrepreneurship and regional growth, especially in urban areas. However, the relationship between industrial diversity, self-employment, and growth in lagging or distressed regions is less clear. To examine these linkages in distressed areas, we first identify a group of distressed counties based on historic data. Then, using detailed industry-level self-employment data, we appraise whether having more self-employed from certain industries is associated with regional growth. We also analyze the relationship between industrial diversity and overall growth and the propensity to be self-employed. The results suggest that having more self-employment overall and in some key industries is associated with more employment growth in distressed counties. We also find that the relationship between economic diversity and self-employment varies by industry and region.     

The End of the Nuclear Era: Nuclear Decommissioning and Its Economic Impacts on U.S. Counties

Between 1957 and 1990, nearly 100 nuclear reactors were constructed throughout the U.S., and nuclear power currently accounts for 20 percent of electricity production nationwide. Nuclear plants are often constructed in small communities for which they constitute a large source of employment and income. To date, 24 nuclear reactors have undergone decommissioning, and more are expected in the future, particularly as nuclear reactors age and face increasingly strict regulations. This paper examines the effects of nuclear decommissioning over time at the county‐level on measures of employment, income, and population using difference‐in‐differences regression and propensity score matching. Panel data are obtained from the U.S. Census Bureau, and cover the years 1975–2014. The analysis finds that nuclear decommissioning is associated with positive and statistically significant increases in employment and per capita income over time. Results suggest that nuclear decommissioning may actually be a positive force in regional economic development, and concludes with limitations of the approach and implications for future research. As an emerging area of research, this paper is meant to build on previous work, as well as to provide a basis for further discussion and debate on the economic future of nuclear host communities and regional economies.