Identifying the export component of industries that produce partly for local consumption

Abstract

Identification of the export nature of an industry in a center within a region has proven difficult because of the complexities, dynamic nature and maturation of regional economies. Location Theory and the work of Jan Tinbergen imply that some industries (hybrid industries) in a center may produce both for local consumption and for export within a region. We focus on hybrid industries in Metropolitan Statistical Areas (MSAs) in the Census Midwest region. We present new statistical tests designed to identify the export component of three different types of hybrid industries. The first type of industry is present in virtually all MSAs, and appears to produce for export in a subset of those MSAs. We present a test to identify the subset of MSAs for which the industry is hybrid. The second type of hybrid industry is absent in a number of MSAs and appears to produce for export in some or all the MSAs in which it is present. Our statistical technique seeks to identify the portion of employment in the industry in the region which produces for export production. Finally, we focus on high-order business services in the five largest MSAs in the Midwest region. While these industries typically produce for local consumption they may produce for export, especially in large MSAs. We present a statistical test for identifying the export component of these industries in large MSAs. To varying degrees, we compare our tests with results obtained using location quotients.