Is the "new economy" benefiting rural places? A model of employment growth in high tech manufacturing industries

While the US experienced a remarkable economic expansion throughout the 1990s, not all regions and not all industries benefited. Over the decade, traditional sectors continued to decline, while growth in the serviceand technology-based sectors that make up the “new economy” helped fuel the boom. For many, the transformation to a knowledge-based economy has heightened concerns that rural areas will fall further behind. In this paper we investigate recent trends in high tech manufacturing industry employment and earnings growth, focusing on rural and urban differences. We first describe the growing earnings gap between rural and urban workers. We then introduce a spatial two-stage Heckman model that 1) identifies factors associated with the existence of an industry in a county, and 2) describes the factors that correlated with county-level employment growth in these industries in 6 states. The analysis examines the period 1990-2000. Our results indicate that rural, in and of itself, neither hinders nor fosters growth in high tech manufacturing industries. This suggests that place-based policies may not be necessary for these sectors. Given this, our results suggest the importance of agglomeration effects in driving both the existence and performance of high tech manufacturing industries.