Industrial Legacy Matters: Implications for the Development and Use of Indices of Regional Competitiveness

Abstract

This article addresses the usefulness of indices of regional competitiveness in guiding economic development strategies for communities with different industrial legacies. Growth models for employment and per capita income are estimated for 151 metropolitan areas in the Southern United States. The explanatory variables for regional growth include measures of New Economy inputs (innovation, human capital, and entrepreneurial environment) and industry structure (composition, size, age, and diversity). The findings indicate that metro growth rates in per capita income are associated primarily with New Economy inputs whereas employment growth rates are related primarily to industry structure characteristics. In addition, interaction terms between the policy and structure variables indicate that policy inferences from indices of competitiveness should vary by city type. For example, increases in knowledge workers and entrepreneurial environment are more positively associated with income growth rates in the smaller, more specialized metropolitan areas. Economic history and industrial legacy matter in the application of competitiveness indices to inform economic development policy.