Yicheol Han, Stephan Goetz (p), Claudia Schmidt

Timothy Slaper

see extended abstract

Jae Beum Cho (p)

Timothy Slaper

At the city and regional level, local economies can be viewed as “ecosystems” where a plethora of agendas act together to shape the overall outcome of the system as a whole. This paper focuses on a key characteristic of regional ecosystems, namely the interrelatedness of its different elements. Concentrating on industrial structure as one aspect of the ecosystem of cities, I utilize data on new firm formation and industrial composition for US cities at detailed industry levels to construct an underlying industry network where the nodes are industries, and the links are tendencies for coagglomeration using the Ellison-Glaeser index. The result is an “industry space” where industries are connected to each other within a network of relatedness. Then, shifts in any particular city’s industrial structure over time are simulated, utilizing an optimization scheme based on The Method of Reflections (Hidalgo and Hausmann 2009). The result is a detailed pathway for economic development that maximizes the development potential of the city, given all possibilities.

Ultimately, this study attempts to answer two questions:
1) Do more successful regions show different patterns of industrial change compared to those that are less successful?
3) How should regions faced with different circumstances promote industrial change such that their economic development capacities are maximized?

Timothy Slaper (p)

Jae Beum Cho

Regional economies are complex systems subject to perturbations – shocks. One element of a region’s economic resilience is evidence of, or capacity for, adapting to shocks. Researchers have cautioned that a shock to a regional economy may displace a region from a growth or recovery trajectory and may erode a region’s ability for adaptation. Thus, if there are metrics and signals for hysteresis, either the event or its aftermath, the need for, and the design of, interventions to mitigate the economic consequences would be more timely and effective.

We adopt an alternative calculation for the recovery phase. This method not only smooths jagged employment paths, but also provides the inputs for calculating the industry contribution to the recovery, indicates the degree to which a region has adapted its industry structure over time and whether a region has undergone a hysteresis event. We propose measures to provide insight to the adaptation narrative. The skew of contribution-to-recovery is modestly correlated with growth.

Statistical analysis using 1474 small U.S. counties suggests that peak, trough and recovery phases and levels are associated employment growth. Sources of income play a role in regional resiliency. Wage and salary income is positively related. Transfer payments, however, serve a dampening effect on drop, but a drag effect on recovery.