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Abstract

This study benchmarks the Lehigh Valley to nine other metropolitan areas within the United States. These areas represent a wide array of economic growth levels. Charlotte, Portland, Seattle, and Nashville represented high growth cities. Minneapolis and Lancaster represented moderate growth cities. Hartford, Flint, Rochester and the Lehigh Valley represented low growth cities. Three analyses attempted to identify reasons for economic growth. The study period included the years 1970 through 1995. All three analyses looked at regional growth relative to the nation. A study of each region’s industry mix compared the diversity of this mix to the overall employment growth of the region. This study also included an analysis of high technology industry, which entailed studies of its presence, its growth and its relation to income growth for each city. The final analysis studied employment growth relative to the nation for specific industry components within each city. Industry diversity analysis identified a strong correlation between diverse economies and high employment growth. The Lehigh Valley showed lower than predicted employment growth, based on the diversity of its industry mix. High technology analysis identified a strong presence of high technology industries within low growth regions. This analysis also identified a strong relationship between positive high-tech industry growth and high growth regions. The Lehigh Valley showed lower than predicted income growth, based on its growth in high-tech industry. Analysis of the industry components showed positive growth in almost all high growth region industry components; a mix of growth and decline in moderate growth region industry components; and declines in almost all low growth region industry components. The Lehigh Valley’s industry components showed growth similar to that of the other low growth regions. The relationship between industry diversity and employment growth may be due to changes in national industry trends. Regions that are more diverse may be able to absorb shocks and react to major shifts in national trends better than regions that specialize in one or more industries. The hypothesis suggests that cities will lie along a curve that correlates higher growth to a more balanced array of industries. Conversely, lower growth will correlate to a more variable mix of industries, or a mix that exhibits specialization in one or more industries. The study notes that presence of high technology industry alone does not foster economic growth. Growth may instead correlate to a constant stable growth of regional high-tech industries relative to the nation. The Lehigh Valley does not follow the patterns of either relationship identified. One of two hypotheses may explain this phenomenon. The first of these suggests that the Lehigh Valley is currently in a transitional state, heading toward higher growth rates powered by an increase in the chemical manufacturing industry and a shift towards a more diverse industry mix. The converse to this hypothesis suggests that the Lehigh Valley belongs as an outlier to the identified trends due to the lackluster growth of its industry components and/or non-economic factors that are not a part of this study. Further analysis of the trends identified here should include a study of a much larger sample size. Research should also look into the true causality of these trends. Two specific avenues of future research include studies of the true affects of industry diversity and of the regional demand for high-tech industry. Additional research may also look into other factors, both economic and non-economic, which may affect growth and do not appear in this study.

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