Reassessing the ‘Massachusetts Miracle’: Reindustrialization and Balanced Growth, or Convergence to ‘Manhattanization’?

Abstract

Research suggests that conventional wisdom about the ‘miraculous’ reindustrialization of the regional economy of Massachusetts is much too simplistic. The decline in unemployment was as much the result of low average labor-force growth as it was of rapid job creation. Also Massachusetts has experienced increases in income and wage inequality, and there has been a dramatic slowdown in employment growth. The manufacturing sector is still deindustrializing and high-tech job growth has virtually ceased. Several complementary explanations are offered for these changes. First, a chronic labor shortage is constraining company expansion. Second the declining rate of growth of federal military procurement may particularly affect Massachusetts. Third, the state economy may have begun to converge on a new equilibrium structure. A shift–share analysis of employment changes during the periods 1973 – 79, 1979 – 84, and 1984 – 87 reveals that the state's competitive advantage has narrowed to a small number of business services and their associated real estate and construction activities.