Export orientation and the limits to local sovereignty

The decade 1990-2000 marked a historical turnaround for large metropolitan areas in the US. For the first time in the post-World-War-II period these metropolitan areas experienced a reduction in the local share of economic activity relative to the export share. The long-standing shift from manufacturing to services, while continuing through the decade, was no longer sufficiently large to offset the increasing export orientation of non-manufacturing industries, including many services. At first glance, the increasing share of export activity in large metropolitan economies might suggest that state and local governments will lose flexibility in determining economic policy. However, the non-manufacturing industries with growing export shares are more place-based than most of the manufacturing exports they are replacing. The paper argues that state and local policy-makers thus continue to have considerable discretion in their choice of economic agendas.