The rise of New York in the early nineteenth century is the result of technological changes that moved ocean shipping from a point-to-point system to a hub and spoke system; New York's geography made it the natural hub of this system. Manufacturing then centered in New York because the hub of a transport system is, in many cases, the ideal place to transform raw materials into finished goods. This initial dominance was entrenched by New York's role as the hub for immigration.

In the late 20th century, New York's survival is based almost entirely on finance and business services, which are also legacies of the port. In this period, New York's role as a hub still matters, but it is far less important than the edge that density and agglomeration give to the acquisition of knowledge.

For 200 years, New York City has been the largest city in the nation, and it continues to outperform most cities that were once its competitors. In the 1990s, the city’s population grew by 9 percent and finally passed the eight million mark.

New York is the only one of the 16 largest cities in the north-eastern or mid-western United States with a higher population today than it had 50 years ago. New York’s economy remains robust. Payroll per employee is more than $80,000 per year in Manhattan’s largest industry and almost $200,000 per year in Manhattan’s second largest industry.

There are several lessons for urban and regional economics from the economic history of New York City. First, there is something to be said for geographic determinism. New York City should have had the biggest harbour and it did. But we cannot understand the full extent of New York’s dominance without understanding that agglomeration
economies and New York’s rise to dominance as a port are connected to the increasing scale of ships and the benefits of specialization.

A second lesson of New York is that transportation costs really matter.
A third lesson is the obvious importance of what is called localization economies. Generally speaking, every industry has some form of very specific industry related needs which were met by agglomerating New York.

A fourth and final lesson is that New York’s success for centuries has been connected to its edge as an idea city.

Harvard University - John F. Kennedy School of Government - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)
Edward L. Glaeser (Researcher), tel. +1 6174962150

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01/06/2006

Edward L. Glaeser

research

Urban Policy > Economy knowledge & employment > Urban economy

Competitiveness