Economic Analysis of Effects of Business Cycles on the Economy of Cities: The Response of City Economies to the Business Cycle

摘要

This paper addresses the relationship between a metropolitan economy's long-term growth and its response to the national business cycle, based on an analysis of data from all establishments in machine tools, electronic components, and motor vehicles taken from the Dun and Bradstreet Market Indicators files for the peak year of 1973, the trough year of 1975, the peak year of 1979, and the trough year of 1983. The results indicate that the business cycle influences a city's secular growth, and a city's secular growth influences its response to the national cycle. Specifically, recessions had a more detrimental effect on long-term suburban growth than on central city growth. A second major finding is that, contrary to expectations, cyclical fluctuations in metropolitan employment were not explained by expansions and contractions in employment, but by fluctuations in establishment births and closings. Employment in continuing establishments was stable over the cycle or behaved countercyclically. Thus, recessions depress long-term rates of growth more acutely in fast growth economies, since fledgling firms that are potentially viable in the long run fail, because they are hit with an economic downturn in their early years. In conclusion, old capital stock and slow growth in central cities is not always a liability. During economic recessions, suburban economies, rather than the central cities, bear the disproportionate share of employment losses. Tables and 13 references are supplied.