Understanding the Economic Performance of Metropolitan Areas in the United States

Abstract

Examining the drivers of metropolitan economic performance, this paper models two dependent variables: change from 1990 to 2000 in gross metropolitan product and MSA employment. It is found that initial-year economic structure (an above average share of manufacturing employment), agglomeration economies, human capital (share of population with bachelor degrees or higher), and presence of state right-to-work laws are positively and significantly related to GMP and employment growth, while the economic age of the area, percentage of Black non-Hispanic residents and average wage at the beginning of the period are negatively and significantly related to both. The regional dummy variables commonly used to explain economic growth, and typically highly significant, are augmented by including climate-related amenity, business environment and economic age. When these three variables are included in the model as independent variables with the regional dummy variables, all three are significant for growth in GMP and the significance of region largely disappears.