Economic Analysis of Effects of Business Cycles on the Economy of Cities: Why Are Plant Closing Rates So High in the Sunbelt

摘要

This study explores reasons for the surprisingly high plant closing rates among Sunbelt establishments, using data from all establishments in machine tools, electronic components, and motor vehicles taken from the 1975, 1979, and 1982 Dun and Bradstreet Market Indicators files. The analysis demonstrated that neither the concentration of new firms in the Sunbelt nor its dependency on branch plants explain the high rates of plant shutdowns. Even after firms less than 5 years old were eliminated from the sample, closing rates still remained higher in the Sunbelt than the Frostbelt. For the electronic components and motor vehicle industries, the proportion of industry employment and firms in branch plants were even in the two regions. For the machine tool industry, the regions with a disproportionate dependency on branches were not the ones with above average closing rates. These regional patterns clearly imply that relatively high tax rates, high labor costs, high energy costs, and a unionized labor force are not driving northern establishments out of business. These results suggest that (1) economic development officials should favor local entrepreneurs over branch plants and (2) localities offering low labor costs as their primary incentive should view the attraction of branch plants as a short-term strategy. Tables and 25 references are supplied.