The response of city economies to national business cycles

Abstract

Since 1973, the U.S. economy has experienced three business cycles, with the 1973 and 1981 recessions being the most severe since the depression. These cycles have been unevenly distributed across the regions of the country, with East North Central states experiencing the greatest swings in employment and income. While a number of researchers have documented and examined the reasons for regional variations in cyclical employment and income [4–6], little is known about the responsiveness of metropolitan economies to the national business cycle. Are central cities more sensitive to the national cycle than suburban economies? If so, what factors, aside from differences in the composition of their local economies, explain the variations? The purpose of this paper is to address these two questions. A better understanding of metropolitan responses to the national business cycles can guide both national countercyclical investment strategies and local taxing and spending policy.