Economic Analysis of Effects of Business Cycles on the Economy of Cities

region or city’s industry composition is an important determinant of the amplitude and timing of its local business cycles. Local economies comprised of cyclically sensitive industries should experience recessions that are severe relative to the nation, whereas local economies made up of cyclically stable activities should exhibit mild cycles relative to the nation. The effects of industry mix on local cycles are clearly stated by Walter Isard (1957): Differences in the intensity and timings of regional cycles are explained in terms of differences in the sensitivity and responsiveness of particular industries. Cycles of a regional economy are simple composites of the cyclical movement of the economy’s industries appropriately weighted.