What is a place known for?
Think Detroit and you likely think cars. Washington, D.C.? Government. Los Angeles, movies and television, nicely incorporated in a single term – Hollywood. Orlando? Disney World. Our comparison of Nashville and Memphis started with jazz, gospel, and country music. After all, if you think Nashville, you likely think country music.
How much of our perceptions are based on reality? In Nashville, the actual music industry is relatively small in terms of direct employment, but because of the tourism generated by the lower Broadway honky-tonk scene, the Opry, and Music Row, the city has become highly dependent upon the industry. And like a snowball rolling down a hill, the growth and interest in the city generates more, and often unrelated, growth.
Like your 401k plan, a lack of diversity may have short term massive gains but are highly vulnerable to changes in consumer preferences, technology, and locational advantage. There are no shortage of once prosperous towns which were dependent upon an industry or resource which are remnants of their former glory.
So, we looked at a simple relationship, between population size and industrial diversity. The AGS Snapshot engine includes a diversity() function which computes a diversity score on any table – in this case, a tabulation of business employment by major NAICS group.
At a county scale, the national industrial diversity map shows some clear regional patterns which can be conducive to growth but can also be risky in the event of major societal shifts.
The plot below shows diversity against the logarithm of population size for cities –
Small cities have a wide range of diversity scores, but generally lower than larger cities which tend to be very diverse. The top cities for economic diversity include at least one surprise –
Some large cities are not particularly diverse given their size from an economic perspective – including San Jose CA (0.792), Washington D.C. (0.745), Jersey City NJ (0.773) and Laredo TX (0.766).
We find that there is a strong relationship between current industrial diversity and population growth from 2000 to the present. (We would use diversity at the start of the period, but we don’t have comparable data). So, we have this paradox.
Areas easily become the focus for a specific industry. The growth of Silicon Valley is by definition a move towards decreasing industrial diversity. All is well as long as the industry itself is healthy – just look to Flint, Michigan for what happens when technology changes and jobs are no longer there.
At the same time as these innovation clusters or growth industries should be encouraged, there must be one eye kept on attracting other firms which increase diversity.
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