Academic journal article Economic Review - Federal Reserve Bank of Kansas City

How High Tech Is the Tenth District?

Academic journal article Economic Review - Federal Reserve Bank of Kansas City

How High Tech Is the Tenth District?

Article excerpt

Newspapers in the Tenth Federal Reserve District generally keep a close eye on where their cities rank in national studies of high-tech activity.1 Readers have good reason to be interested in how "high tech" their communities are, despite the recent downturn in the sector. High-tech workers are among the best paid of all workers and, if these recent studies are correct, an area's failure to embrace the "New Economy" could result in a lower standard of living and fewer opportunities for residents down the road. But studies of high-tech cities, which are usually produced by think tanks, trade groups, or business magazines, have varying results and usually focus only on major metropolitan areas. As a result, it is often difficult for policymakers, businesses, and residents in the Tenth District to understand where they really stand in the "New Economy" and how they got there.

This article shows that much of the Tenth District is quite high tech, once the geographic distribution of the region's population is taken into account. Across the country, the overarching determinant for the amount of local high-tech activity appears to be a metro's size. Because the Tenth District has relatively few large cities, the level of high-tech activity in most district states falls short of the national average. But analysis of high-tech activity in metro areas shows that nearly all of the district's larger metros exceed national averages for cities their size. In fact, several of the region's larger cities rank among the most high-tech places in the nation.

The first section of the article defines "high tech" and documents the overall level of high-tech activity in the Tenth District. The second section explains why high-tech firms and workers concentrate in metro areas and shows that, given the size of its cities, the district is quite high tech. The third section uses a set of case studies to explain why hightech activity in many Tenth District cities exceeds national averages.

I. OVERVIEW OF HIGH TECH IN THE NATION AND DISTRICT

Determining how high tech the Tenth District is requires defining "high tech" in a measurable way. Agreement has been fairly wide among researchers about what high tech means in general. Some quote a 1982 definition by the Congressional Office of Technology Assessment: "The design, development, and introduction of new products and innovative manufacturing processes, or both, through the systematic application of scientific and technical knowledge" (Hecker). In practice, most studies have used some measure for the output-or the value of goods and services produced-of certain local industries classified as high tech to rank cities according to their level of high-tech activity.2

But despite this general agreement about a definition of "high tech" and the type of measure to be used, there has been considerable disagreement on which industries should be considered high tech. One common method of industry selection is to simply choose industries whose products and services are widely considered as high tech-such as computer manufacturing and online information services. Another fairly common approach is to determine the percentage of an industry's national employment in high-tech occupations and to consider the industry high tech if this percentage significantly exceeds the national average across all industries. For example, one recent study considered an industry high tech if at least 9 percent-or three times the national average-of its employees were engineers, physical scientists, life scientists, computer scientists, math scientists, and science/engineering managers (Markusen and others). This study identified 30 such industries, led by the "Guided Missiles and Space Vehicles" industry, which had 43 percent of its employment in high-tech occupations.

This article uses two distinct measures to assess the level of hightech activity in the Tenth District. Examining two very different measures provides robustness to the study's results. …

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