How regional economic structure matters in the era of COVID-19: resilience capacity of U.S. states

Ayoung Kim; Jaewon Lim; Aaron Colletta

doi:10.1007/s00168-022-01134-w

How regional economic structure matters in the era of COVID-19: resilience capacity of U.S. states

Ann Reg Sci. 2023;70(1):159-185. doi: 10.1007/s00168-022-01134-w. Epub 2022 May 7.

Authors

Ayoung Kim¹, Jaewon Lim², Aaron Colletta²

Affiliations

¹ Department of Agricultural Economics, Mississippi State University, 317 Lloyd-Ricks-Watson Bldg., Mississippi State, MS 39762 USA.
² School of Public Policy and Leadership, University of Nevada Las Vegas, 4505 S Maryland Pkwy, Box 454030, Las Vegas, NV 89154-4030 USA.

Abstract

The COVID-19 pandemic is an unexpected-extreme event and has considerably impacted the national and regional economies. This paper emphasizes the importance of industrial structure for a region's resistance to the recessionary shock. Two significant factors that may determine the regional industrial structures in this ongoing recession include the relative composition of essential/non-essential sectors and the intensity of face-to-face interactions. Considering these factors, we focus on two groups of industries: essential industry with low interpersonal interactions and non-essential industry with high interpersonal interactions. The specialization in these industries is associated with the regional economic resistance to the COVID-19 induced recession. Estimation results from the ordinal logistic regression models show that essential industries with low interpersonal interactions, especially the retail and service sectors--for instance, non-store retailers and financial and professional service--are significantly related to regional economic resistance, and their relationship intensifies compared to other sectors during the COVID-19 pandemic. However, states specialized in the non-essential industries with high interpersonal interactions are less likely to resist economically during the lockdown-COVID and until the stabilizing-COVID period. In addition, a state that quickly recovered from the 2001 recession is more likely to resist the pandemic shock during early- and lockdown-COVID periods. Findings in this paper indicate the importance of regional industrial structure to determine the level of vulnerability to unexpected recessionary shocks. Additionally, identifying the vital factors to determine the industrial structure based on the type of shock is found to be crucial.

Supplementary information: The online version contains supplementary material available at 10.1007/s00168-022-01134-w.

Keywords: L16; L8; P25; R11; R12.