A Model of Micropolitan Area Sensitivity to the Business Cycle : Evidence from the Plains Region

Past literature has examined the responsiveness of various economies (region, state, and metropolitan area) to changes in the U.S. business cycle. The objective of this study is to determine if spatial disaggregation to the small core city provides further insights to the co-movement of local area conditions to national business swings. Earlier studies have underscored the importance of examining the role of small cities and the factors which influence their sensitivity to the national cycle. This study focuses on another spatially disaggregated level: the micropolitan statistical area which consists of one or more counties with at least one city with more than 10,000 but less than 50,000 people. It focuses on 87 micropolitan statistical areas located in the seven states (Kansas, Iowa, Missouri, Minnesota, Nebraska, North Dakota, and South Dakota) of the Plains region. The study estimates and analyzes the correlations of annual percentage changes in various micropolitan area economic measures (total employment, nonfarm employment, Gross Regional Product, and personal income) with respect to changes in US real GDP over the 1969-2017 period. There are wide variations in business cycle sensitivity of micropolitan areas across-states, withinstates, and depending on the specific economic measure used