This paper was prepared with funding assistance from the Aspen Institute and the National Governors' AssociatIon.
Rural-urban divide -- Economic aspects, Regional economic disparities -- Analysis, Economic development
The objective of this study was to explore a new method of analyzing the performance of substate economies. A major limitation of conventional analyses of economic diversity and growth is the reliance on static measures of economic structure. Such measures do not capture the patterns of growth dynamics or structural change the region may be experiencing.
This paper discusses a new measure of dynamic economic diversity and explores its relationship to economic performance. The measure is a statistical index that reflects the degree to which employment in a county's industries move together over time. The more the industries' employment levels move together, the higher the value of the index. A high index indicates a high degree of regional economic integration.
The analysis was applied to county-level data from three states: Iowa, Minnesota, and Wisconsin. The findings: • Metro areas showed the highest values of the dynamic coherence index, and farm counties had the lowest values. Nonfarm/nor~etro counties were in the middle range. • High-coherence counties tend to have higher levels of per capita income. • Dynamic coherence appears to be positively related to the rate of economic growth as measured by employment growth rates.
These findings may indicate that conventional static measures do not capture the economic linkages between industry sectors that make them move together. The positive correlations between the index of dynamic coherence and both income and employment growth may be reflecting the importance of interindustry linkages to the growth process.
McHugh, Richard, et al. Measuring dynamic patterns in the structure of substate economies. Center for Agricultural and Rural Development, Iowa State University, 1990.