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Regional Economic Fluctuations: Portfolio Variance And Industrial Instability Across Metro Areas

Author

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  • James A. Kurre

    (Pennsylvania State University at Erie)

  • Clifford H. Woodruff III

    (Bureau of Economic Analysis, U.S. D.O.C.)

Abstract

Portfolio variance analysis is a useful tool for examining both a region's industrial diversification and its cyclical instability. Ideally, it can guide policy makers in choosing industrial targets that will reduce regional instability. However, for portfolio variance to be a useful tool, policy makers must be able to predict the effect of a new industry on the local economy. This paper applies portfolio variance analysis to 17 American MSAs in order to determine the cyclical characteristics of industries and to determine if they are consistent across regions. We also examine regional business cycle amplitude and how it relates to a region's industrial structure. In the process, we identify a technique for measuring the contribution of each industry to an MSA's instability and for separating that effect into portions due to the size of the industry and its cyclical behavior.

Suggested Citation

  • James A. Kurre & Clifford H. Woodruff III, 1995. "Regional Economic Fluctuations: Portfolio Variance And Industrial Instability Across Metro Areas," The Review of Regional Studies, Southern Regional Science Association, vol. 25(2), pages 159-186, Fall.
    • Handle: RePEc:rre:publsh:v:25:y:1995:i:2:p:159-186
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    References listed on IDEAS

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    1. Coulson N. Edward, 1993. "The Sources of Sectoral Fluctuations in Metropolitan Areas," Journal of Urban Economics, Elsevier, vol. 33(1), pages 76-94, January.
    2. Niles C. Schoening & Larry Sweeney, 1989. "Applying an Industrial Diversification Decision Model to Small Regions," The Review of Regional Studies, Southern Regional Science Association, vol. 19(3), pages 14-17, Fall.
    3. Sammis B. White & John F. Zipp & William F. McMahon & Peter D. Reynolds & Jeffrey D. Osterman & Lisa S. Binkley, 1990. "ES202: The Data Base for Local Employment Analysis," Economic Development Quarterly, , vol. 4(3), pages 240-253, August.
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    1. Edward Nissan & George Carter, 2009. "Specialization of state sectoral employment," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 33(2), pages 148-160, April.
    2. Marina Malkina, 2019. "How Change in Industry Mix Can Improve the Financial Performance of Regional Economies: Evidence from the Portfolio Approach," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 67(6), pages 1561-1575.
    3. Geoffrey Hewings, 2008. "On some conundra in regional science," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 42(2), pages 251-265, June.
    4. Marina Yurievna Malkina, 2018. "Instability of Financial Return of Regional Economies and Its Determinants," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 3, pages 88-114.
    5. Hewings, Geoffrey J.D., 2014. "Spatially blind trade and fiscal impact policies and their impact on regional economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(4), pages 590-602.
    6. Fritz, Oliver, 1999. "Optimal Management of a Regional Income and Pollution Portfolio," ERSA conference papers ersa99pa187, European Regional Science Association.
    7. Edward Nissan & George Carter, 2003. "Contributions of state to regional income dispersion," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 27(2), pages 243-261, June.
    8. Edward Nissan & George Carter, 2006. "The measurement of employment diversity for states and regions," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 30(2), pages 186-197, June.

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