Economic Analysis of Effects of Business Cycles on the Economy of Cities: Regional Variations in Cyclical Employment

摘要

This paper presents and tests an econometric model to explain cross - regional differences in cyclical behavior. The model divides each State economy into an export sector and a residentiary sector; the severity of a State's recession is equivalent to the weighted recessions in the two sectors. The model is tested with State - level data from the five post - World War II recessions between 1950 and 1975 (1953 - 54, 1957 - 58, 1960 - 61, 1969 - 70, and 1973 - 75). The model proposes that within the manufacturing or export sector of a State economy, the severity of an actual recession deviates from the expected recession based on industry mix for five reasons: the capital - labor ratio, the age of States' capital stock, the extent to which its labor force is unionized, the existence of a labor shortage or surplusin peak years, and the level of unemployment insurance benefits vary across States to influence the severity of State recessions. An additional factor expected to influence the severity of regional recessions is variation in the decline in employment in State's residentiary activities. The findings suggest that 36 percent of the cross - State variation in employment cycles can be explained by cross - State differences in industry mix. Further, evidence indicates that there are cross - State differences in several economic and institutional variables that influence the severity of State business cycles. Holding industry mix constant, States that have high capital - labor ratios and an old capital stock, are nonunionized, and distribute high unemployment benefits are cyclically stable. An appendix lists 10 data sources. Two diagrams and 37 references are included.