Small City Economic Dynamism Index
Small cities are like nerve centers connecting the regional economy. They are the hearts of their respective counties and metropolitan areas as well as hubs of employment, retail, health care, and education for people living in surrounding rural areas. Many small cities are growing and attracting new investments, but unemployment, poverty, vacant buildings, and economic distress are pronounced in some small metros.
We've compiled a dataset and created the Small City Economic Dynamism Index to help policymakers and practitioners gain more nuanced perspectives. The index ranks 245 small U.S. cities across 14 indicators of economic dynamism in four categories: demographics, economics, human capital, and infrastructure.
Data, Definitions, and Sources
Drawing from the literature on small-city sizes and types, this index focuses on small-city metropolitan statistical areas (MSAs) with a population of fewer than 500,000. We extracted data on 277 MSAs that meet this population threshold. Thirty-two MSAs were eliminated from the analysis due to missing data points for key variables, resulting in a data set of 245 small-city MSAs.
The 14 indicators selected as measures of economic dynamism are drawn from various sources, including the U.S. Census Bureau, the Census Bureau's Business Dynamics Statistics, the Census Bureau's County Business Patterns, the Bureau of Labor Statistics, and the Bureau of Economic Analysis. The geographic level indicates the geographic area from which the data have been drawn. The data were adjusted for MSA boundary changes that occurred to allow for a comparison over time.
Small cities have been understudied by scholars, policymakers, and practitioners. There have been studies focused on economic growth, income inequality, a sense of place, and economic development in small cities, but most are case studies. Further, the existing literature on definitions of cities based on size or position in the metropolitan region is limited. The literature review below describes several key issues identified from recent research including:
- The strong headwinds facing small cities
- Despite headwinds, many are growing and some are resurging from downturn
- Strong anchor institutions and industrial structure can be predictive of growth
This analysis rests on the notion of economic dynamism as the potential of a specific place to generate positive economic performance. In a small city context, economic dynamism is defined in terms of economics, demographics, human capital, and infrastructure. The index accounts for long-term and short-term, as well as leading and lagging, indicators. Long-term indicators are used to adjust extreme variations in a business cycle, while short-term indicators are used to incorporate the recent performance. Lagging indicators represent the trend of growth reflected by historical data. Leading indicators are included to capture early-stage patterns reflective of potential demand within the local market. The index is calculated as the unweighted sum of growth ratios across both short-and long-term time frames. To compare the relative economic dynamism of small cities, 245 MSAs are first grouped into quartiles based on the scores.
Other Resources and Publications
Economic Dynamism in Small Cities
Many small cities are growing at faster rates than has occurred in decades. This article examines factors that contribute to economically vital small cities. (March/April 2015)
Economic Dynamism in Small Cities (Part 2): Migration, Commuting, New Firm Creation, and Population Density in Small Cities
The factors that contribute to economic dynamism in a small city can be elusive to define and measure. This article looks at some elements of small city economic dynamism that may contribute to growth and development. (May/June 2015)
Research and data support have been provided by community and economic development interns Kyungsoon Wang, Mindy Kao, and Mels de Zeeuw.