Identification of changes in the economic interactions among sectors from 1995 to 2010 for Chicago economy using hierarchical feedback loop analysis

Abstract

In this paper, hierarchical feedback loop analysis is employed to identify changes in the economic interactions among sectors during the process of structural transformation of the Chicago economy. The application in our paper differs from previous studies adopting this methodology as it focuses on the time dimension of change through analysis of feedback loops every 5\xa0years from 1995 to 2010. A total of 36 hierarchical feedback loops for years 1995, 2000, 2005 and 2010 were obtained. The first two feedback loops captured the main character of the economic structure transformation. The linkages strength between five pairs of sectors which include linkages from hotels, personal and business services to construction, from finance and insurance to wholesale and retail trade, etc., accounted for 83.5% of the intensity change in the first feedback loop from 1995 to 2010. Structural change of linkages played little role in the complexity change of the second feedback loop. The change of linkages strength from wholesale and retail trade to construction, from rubber and miscellaneous plastics products to chemicals and allied products accounted for about 83.0% of this latter loop. The economic transformation of Chicago economy showed that the development of services has not come at the expense of the decline of industry. Over the period in question, the Chicago economy became more diversified.