The Economic Performance of Cities: A Markov-Switching Approach

FRB of St. Louis Working Paper No. 2006-056A

41 Pages Posted: 25 Oct 2006

See all articles by Michael Owyang

Michael Owyang

Federal Reserve Bank of St. Louis - Research Division

Jeremy Piger

University of Oregon - Department of Economics

Howard J. Wall

Lindenwood University - Center for Economics and the Environment

Christopher H. Wheeler

Federal Reserve Bank of St. Louis - Research Division

Date Written: October 2006

Abstract

This paper examines the determinants of employment growth in metro areas. To obtain growth rates, we use a Markov-switching model that separates a city's growth path into two distinct phases (high and low), each with its own growth rate. The simple average growth rate over some period is, therefore, the weighted average of the high-phase and low-phase growth rates, with the weight being the frequency of the two phases. We estimate the effects of a variety of factors separately for the high-phase and low-phase growth rates, along with the frequency of the low phase. We find that growth in the high phase is related to human capital, industry mix, and average firm size. In contrast, we find that growth in the low phase is mostly related to industry mix, specifically, the relative importance of manufacturing. Finally, the frequency of the low phase appears to be related to the level of non-education human capital, but to none of the other variables. Overall, our results strongly reject the notion that city-level characteristics influence employment growth equally across the phases of the business cycle.

Keywords: Growth in cities, business cycle phases

JEL Classification: R11

Suggested Citation

Owyang, Michael T. and Piger, Jeremy M. and Wall, Howard J. and Wheeler, Christopher H., The Economic Performance of Cities: A Markov-Switching Approach (October 2006). FRB of St. Louis Working Paper No. 2006-056A, Available at SSRN: https://ssrn.com/abstract=939542 or http://dx.doi.org/10.2139/ssrn.939542

Michael T. Owyang (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

Jeremy M. Piger

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States

Howard J. Wall

Lindenwood University - Center for Economics and the Environment ( email )

209 S. Kingshighway
St. Charles, MO 63301
United States

Christopher H. Wheeler

Federal Reserve Bank of St. Louis - Research Division

411 Locust St
Saint Louis, MO 63011
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
47
Abstract Views
591
PlumX Metrics