Economic Analysis of Effects of Business Cycles on the Economy of Cities: Why Are Plant Closing Rates So High in the Sunbelt

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Overview

Until recently, a common explanation for lagging growth in the Frost belt was that a large proportion of Northern establishments were not competitive in national and international markets. According to this line of reasoning high wages, a unionized labor force, high energy costs, old capital equipment located at inefficient sites, and high taxes were undermining the competitive position of Northern firms. These high operating costs, combined with shrinking regional markets due to the North to South shift in employment and population, were assumed to result in higher rates of plant closures in the Frostbelt than Sunbelt region(Bluestone and Harrison 1983; Storper and Walker 1984). High rates of plant relocations and failures were assumed to explain, in part, the economic stagnation and slow growth of the frostbelt