Resilience of US Metropolitan Areas to the 2007 Financial Crisis

Abstract

This paper revisits and contributes to geographies of the 2007 financial crisis and ensuing recession by testing the statistical relationships between a set of economic indicators and growth in metropolitan areas in the United States. Two research questions organize the quantitative strategy. First, were the effects of crisis distributed evenly across the landscape and if not can we attribute these differential impacts to the economic, financial, and urban structure? Second, what types of metropolitan areas performed best and worst during the crisis? From this vantage point, we can explore the relationship between metropolitan economic structure, financialization, and distributional consequences of crisis. The results show that there is a territorial and sectoral element to crisis resistance and recovery, partially explained in terms of a jobless recovery. Size, specialization, and high density of subprime mortgages have adverse effects on metropolitan resilience, while financial concentration and income demonstrate positive effects. While the variables explain a portion of the variance for output losses during the recession, they explain little of the pre- or post-recession period growth patterns. However, the housing market variable continues to exert negative effects on growth during the recovery period, while specialization exerts positive effects. The results contribute to conversations between prior economic geographies of finance and financial crisis that employ post-Keynesian concepts, dependency theory, and relational explanations for the territorial distribution of economic downturns.

Keywords: economic specialization, finance insurance and real estate (FIRE), financial crisis, metropolitan statistical area, resilience, subprime mortgages

JEL Classification: C21, G20, 018, R12