Industry Clusters and Regional Economic Development in the Midwest

Industry clusters (ICs) are a popular strategy followed by state and local governments to achieve regional and local economic growth and development. We investigate the presence of ICs in Metropolitan Statistical Areas (MSAs) in the Midwest between 2000 and 2010, and the degree to which the ICs have contributed to economic growth. Results indicate that the manufacturing, retail trade, health care and social assistance, finance and insurance, wholesale trade and construction industries were the six most common industries with concentrations across the MSAs in the Midwest. Also, only few industries (manufacturing, construction, utilities and wholesale trade) consistently showed statistically significant connections with the economic growth variables considered, even though most industries considered correlate positively with the economic development indicators. Changes in control variables such as population density, unemployment rate and education have greater impacts on economic development than do the cluster variables. Our study supports the hypothesis that while the presence of an industry cluster contributes to economic development, changes in other variables, such as a reduction in unemployment rate, have relatively greater impacts. Thus, the IC approach may not necessarily be among the most preferred strategy to boost economic development in the Midwest.