Tuesday Feb 3

Introduction to sectoral analysis (understanding local economies by understanding firms and industries)

Example: Braddock PA (compared to other places)•including short NY Times video•3-page hand-out of US Census data

Presentations: the second half of the Assignment 1 profiles

Feb 3: Introduction to Sectoral Analysis + Data Sources• Industry vs. occupation• Typology/classification of sectors• Industry trends: growth and decline

Feb 5: Economic Base, Multipliers, Location Quotients• What is the relative concentration of a sector in a location?• What is the link between export and non-export activity?• How do changes in one activity affect another activity?

Feb 10: Shift-Share and the Analysis of Industrial Mix• How do we isolate the employment change into three elements:

national changes, sectoral changes, relative competitiveness?

Feb 12: Economic Geography, Location Theory and Theories of Firm Location

• Why do firms start, relocate, close based on geography?

Feb 3: Introduction to Sectoral Analysis + Data Sources• Industry vs. occupation• Typology/classification of sectors• Industry trends: growth and decline

Feb 5: Economic Base, Multipliers, Location Quotients• What is the relative concentration of a sector in a location?• What is the link between export and non-export activity?• How do changes in one activity affect another activity?

Feb 10: Shift-Share and the Analysis of Industrial Mix• How do we isolate the employment change into three elements:

national changes, sectoral changes, relative competitiveness?

Feb 12: Economic Geography, Location Theory and Theories of Firm Location

• Why do firms start, relocate, close based on geography?

The organization of economic activity:

A range of perspectives include….

Institutional typologies – how business activity organizes itselfAnalytical typologies – how scholars understand economic activityRegulatory typologies – how government regulates, manages, taxes economic activity

Micro vs. macro approaches

And do you focus on •the nature of work (e.g., occupations, skills)•The nature of output (e.g., products)•The relationship to the means of production (e.g., employee, employer)•Geography (location)

Units of analysis include…

Employees/workersoccupationsEstablishmentsFirmsIndustries/sectors

Industrial clusters

Local and regional economiesNational economies

I.

II.

III.

• Markusen, Ann. 1994. Studying Regions by Studying Firms. The Professional Geographer 46 (4):477-490.

Terms:EstablishmentsFirmsIndustriesregions

region

establishment

establishment

establishment

Multi-establishment firm A

Establishment

Vs.

Firm

Each polygon = establishment

Shape = industry

Color = firm

establishment

establishment

establishment

Multi-establishment firm B establishment

establishment

establish

ment

establish

m

ent

Multi-establishment firm C

establishment

• Chinitz, Benjamin. "Contrasts in Agglomeration: New York and Pittsburgh," in Readings in Urban Economics, edited by Matthew Edel and Jerome Rothenberg. New York: Macmillan Company, 1972, pp. 90-104

Chinitz, Benjamin. "Contrasts in Agglomeration: New York and Pittsburgh”

Areas of difference between the two cities: SizeIndustrial structureRate of growth

Areas of difference between the two cities: SizeIndustrial structureRate of growth

EntrepreneurshipCapitalLaborIntermediate goods and services

It should be apparent by now that what I am reaching for is the specification of a function which relates external economies and diseconomies to industry structure, size being held constant. My feeling is that we have been too prone to associate external economies and diseconomies with size. We have been disturbed at not being able to derive a satisfactory correlation between the two. What I have tried to do is explore some of the residual variation around the size function.

It should be apparent by now that what I am reaching for is the specification of a function which relates external economies and diseconomies to industry structure, size being held constant. My feeling is that we have been too prone to associate external economies and diseconomies with size. We have been disturbed at not being able to derive a satisfactory correlation between the two. What I have tried to do is explore some of the residual variation around the size function.

size

Industrial structure

•Access to capital•Entrepreneurship•More dynamic labor market•Culture of risk-taking and innovation

Rateof regionalgrowth

diversification

Agglomeration EconomiesCan arise both from increased efficiency and innovation

efficiency

Increased profitability due to lowering the per unit cost of producing the same item

innovation

due to producing existing items in new, better ways (process innovation) or producing new items (product innovation)

Spatial clusterings (e.g., cities, regions) can arise for both reasons.

1930 Census

Industry – what you produce (the output of your labor) often understood by knowing the employer -- use the NAISC (once SIC)

Occupation – how you produce (the input of your labor) -- often understood by job title -- use the Standard Occupational Classification (SOC)

Industry – what you produce (the output of your labor) often understood by knowing the employer -- use the NAISC (once SIC)

Occupation – how you produce (the input of your labor) -- often understood by job title -- use the Standard Occupational Classification (SOC)

labor

resources

inputs

the firm outputs

Defined by occupation

Defined by industry

Where you work (i.e., what business)

What you do at work (your tasks, skills)

labor

resources

inputs

the firm outputs

Defined by occupation

Defined by industry

INNOVATION

PROCESSINNOVATION PRODUCT

INNOVATION

Industry – what you produce (the output of your labor) often understood by knowing the employer -- use the NAISC (once SIC)

Occupation – how you produce (the input of your labor) -- often understood by job title -- use the Standard Occupational Classification (SOC) – maintained by the BLS [link]

Industry Occupation

Steel (manufacturing)

Educational services

janitor

engineer

Where you work (i.e., what business)

What you do at work (your tasks, skills)

Occupation – how you produce (the input of your labor) -- often understood by job title -- use the Standard Occupational Classification (SOC)

Industry – what you produce (the output of your labor) often understood by knowing the employer -- use the NAISC (once SIC)

Which one is more important in determining…

Wages and income

Benefits (including health and retirement)

Job stability

Job advancement (and human capital development)

Multiplier effects

Geographic location of work

Racial and gender and age structure of workforce

North American Industry Classification System

• Old system: SIC codes (1937 – ca. 1997)• New system: NAISC (1997 - )• Note: Some agencies still use SIC codes

North American Industry Classification System

• Done by establishment (usually a single physical location) -- note: an enterprise (e.g., firm may have multiple establishments, e.g., multiple locations)

• Each establishment gets assigned ONE NAICS code based on its “primary business activity” ”Ideally, the primary business activity of an establishment is determined by relative share of production costs and/or capital investment. In practice, other variables, such as revenue, value of shipments, or employment, are used as proxies. The Census Bureau generally uses revenue or value of shipments to determine an establishment's primary business activity.”

North American Industry Classification System

From http://www.census.gov/eos/www/naics/faqs/faqs.htmlNAICS is a two- through six-digit hierarchical classification system, offering

five levels of detail. Each digit in the code is part of a series of progressively narrower categories, and the more digits in the code signify greater classification detail.

DIGIT1-2 The first two digits designate the economic sector, 3 the third digit designates the subsector, 4 the fourth digit designates the industry group, 5 the fifth digit designates the NAICS industry, and 6 the sixth digit designates the national industry.

The five-digit NAICS code is the level at which there is comparability in code and definitions for most of the NAICS sectors across the three countries participating in NAICS (the United States, Canada, and Mexico). The six-digit level allows for the United States, Canada, and Mexico each to have country-specific detail.

A complete and valid NAICS code contains six digits.

From http://www.census.gov/eos/www/naics/faqs/faqs.htmlNAICS is a two- through six-digit hierarchical classification system, offering

five levels of detail. Each digit in the code is part of a series of progressively narrower categories, and the more digits in the code signify greater classification detail.

1-2 The first two digits designate the economic sector, 3 the third digit designates the subsector, 4 the fourth digit designates the industry group, 5 the fifth digit designates the NAICS industry, and 6 the sixth digit designates the national industry.

The five-digit NAICS code is the level at which there is comparability in code and definitions for most of the NAICS sectors across the three countries participating in NAICS (the United States, Canada, and Mexico). The six-digit level allows for the United States, Canada, and Mexico each to have country-specific detail.

A complete and valid NAICS code contains six digits.

Source: http://www.census.gov/prod/ec02/02numlist/m31r-nl.pdf

11. How can I have my company's NAICS code changed?There is no "official" way to have a company's NAICS code changed and there is no

central register that represents the "official" NAICS classification for business establishments. Various Federal government agencies maintain their own directories of business establishments, and assign classification codes based on their own needs. Generally, the classification codes are derived from information that the business establishment has provided on surveys, forms, or administrative records. For this reason, we recommend that you contact the agency that has assigned the code that you believe should be changed. For example, if you question the NAICS code contained on a form received from the Occupational Safety and Health Administration (OSHA), you should contact the Department of Labor. For access to a list of Federal government agencies' websites, visit www.usa.gov/Agencies/Federal/All_Agencies/index.shtml .Back to top

12. How can I get a new NAICS code created for my type of business?NAICS is scheduled to be reviewed every 5 years for potential revisions, so that the

classification system can keep pace with the changing economy. This is the only time that new NAICS codes can be considered. See the NAICS Update Process Fact Sheet [PDF 37K] for more information.

Largest increases gross domestic product (GDP) -- “the output of goods and services produced by labor and property located in the United States” --BLS (Bureau of Labor Statistics)

Manufacturing Employment(Millions of jobs)Sources: Congressional Budget Office; Department of Labor, Bureau of Labor

Statistics. Note: The vertical bars indicate periods of recession as defined by the National Bureau of Economic Research.

http://www.cbo.gov/showdoc.cfm?index=5078&sequence=0

Output and Employment in the Manufacturing Sources: Congressional Budget Office; Department of Labor, Bureau of Labor Statistics;

Department of Commerce, Bureau of Economic Analysis.Note: The vertical bars indicate periods of recession as defined by the National Bureau of Economic Research.

http://www.cbo.gov/showdoc.cfm?index=5078&sequence=0

Employment by Sector as percent of total2002 Economic Census: Advance Summary Statistics for the United States

2002 NAICS Basis (by 2-digit NAICS code)

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%

Educational services

Utilities

Arts, entertainment, and recreation

Real estate and rental and leasing

Other services (except public administration)

Transportation and warehousing

Information

Wholesale trade

Finance and insurance

Construction

Professional, scientific, and technical services

Administrative and support and waste management and remediation services

Accommodation and food services

Manufacturing

Retail trade

Health care and social assistance

Source of data: http://www.census.gov/econ/census02/advance/TABLE1.HTM

Source of data: http://www.census.gov/econ/census02/advance/TABLE1.HTM

Employment and Sales by Sector as percent of total2002 Economic Census: Advance Summary Statistics for the United States 2002 NAICS

Basis (by 2-digit NAICS code)

manufacturing

Health care and social assistance

retail trade

accommodation and food services

administrative and support and waste management/remediation

professional, scientific, and technical services

construction

finance and insurance

wholesale trade

educational services

utilities

arts, entertainment and recreationother services

information

transportation & warehousing (sales data supressed)

real estate, rental/leasing

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

24.0%

0.0% 4.0% 8.0% 12.0% 16.0% 20.0% 24.0%

Paid Employees (Percent of all sectors)

Sales, receipts (percent of all sectors)

Sales-intensive

labor-intensive

-30%

-43%-16%+19%

+20%+31%

+45%

+115%

+22%

Percent Change in Manufacturing Employment by US Census Division, 1967 - 1995

Sources: Bureau of Labor Statistics, Employment and Earnings; Statistical Abstract of the United States 1993 (Table No. 661); Annual Survey of Manufacturers, Geographic Area Statistics, series M95(AS)-3

example: steel

Link to census

example: steel

http://www.census.gov/econ/census02/http://www.census.gov/econ/census02/data/comparative/USCS_31.HTM

Shipments per capita, Primary metal manufacturing (NAICS 331), 2002

Number of Employees, Primary metal manufacturing (NAICS 331), 2002

0%

5%

10%

15%

20%

25%

30%

35%

Employment 2000 -- Percent Employed in Manufacturing, by Sex

Employed civilian population 16 years and over: Male; Manufacturing

Employed civilian population 16 years and over: Female; Manufacturing

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Employment 2000 -- Percent Employed in Professional; scientific; and technical services, by Sex

Employed civilian population 16 years and over: Female; Professional; scientific; and technical servicesEmployed civilian population 16 years and over: Male; Professional; scientific; and technical services

0%

5%

10%

15%

20%

25%

30%

35%

Employment 2000 -- Percent Employed in Retail Trade, by SexEmployed civilian population 16 years and over: Female; Retail tradeEmployed civilian population 16 years and over: Male; Retail trade

0%

5%

10%

15%

20%

25%

30%

35%

Employment 2000 -- Percent Employed in Educational Services, by SexEmployed civilian population 16 years and over: Female; Educational servicesEmployed civilian population 16 years and over: Male; Educational services

Ann Arbor Detroit Detroit-Ann Arbor-Flint

CMSA

Braddock, PA Homestead, PA Pittsburgh Pittsburgh MSA0%

5%

10%

15%

20%

25%

30%

housing units: percent vacant (source: 2000 Census)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Unemployment Rate (source: 2000 Census)

Male Unemployment RateFemale Unemployment Rate

Ann Arbor Detroit Detroit-Ann Arbor-Flint CMSA Braddock, PA Homestead, PA Pittsburgh Pittsburgh MSA0

10000

20000

30000

40000

50000

60000

Median Household Income, 1999 (source: 2000 Census)

10000 15000 20000 25000 30000 35000 40000 45000 50000 550000

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

Ann Arbor

Detroit

Detroit CMSA

Braddock PA

Homestead PA

Pittsburgh

Pittsburgh MSA

Household Income (1999) and Median Housing Value (2000)

Specified owner-occupied housing units: Median value

Med

ian

hous

ehol

d in

com

e in

199

9