Midwest Economy Blog

Economic Development in Indianapolis, Indiana

July 28, 2014

This is a second in a series of blogs that highlights findings from an upcoming Economic Perspectives article on economic development efforts and industry trends in the largest metropolitan areas in the Seventh District. (For a complete profile of all five cities see, Industrial clusters and economic development in the Seventh District’s largest cities.) This blog focuses on Indianapolis. Like Des Moines, Indianapolis has the advantage of being the state capitol. This helps stabilize its performance in economic downturns. In addition, Indianapolis has a fairly unique regional governance structure called Uni-gov, which it adopted in 1970. This structure supports more unified economic planning across the metropolitan area. When it comes to industry structure, there is a diverse mix of industries in the area, along with some specialized niche industries, such as amateur athletics and auto racing.

Indianapolis MSA Industry Structure

Table 1 displays the industry structure of Indianapolis (based on employment relative to the U.S. as a whole). In addition, the table provides location quotients (LQs)1 that demonstrate the relative concentration of that industry in the Indianapolis MSA versus the U.S. as a whole. Any score above 1 indicates that the MSA has a concentration above the U.S. average. For example, construction employment in Indianapolis has an LQ of 1.06, which means that its employment share is 6 percent above the U.S. average.

The BLS figures for 2012 have nondisclosure issues for some large sectors, such as manufacturing and accommodations and food service, which likely make significant contributions to the metropolitan economy. Based on the available sectors, Indianapolis’s metropolitan employment shows above national average concentrations in real estate (LQ = 1.1), finance and insurance (1.07), transportation and warehousing (1.66), administrative and waste services (1.29), and construction (1.06).

Table 1. Indianapolis MSA Employment Shares, 2012

Indianapolis MSA Employment Shares, 2012
Note: ND indicates nondisclosure rules prevent reporting of the data. Employment shares above the U.S. average are in bold.
Source: US Bureau of Labor Statistics and Haver Analytics

Indianapolis MSA Economic Development Strategy

Develop Indy is a business unit of the Indianapolis Chamber of Commerce that partners with a wide array of local agencies to identify the region’s competitive advantages and target industries for growth.2 The initiative has identified six factors that provide a competitive edge to the region: 1) low cost of doing business, including favorable taxation rates (lowest sales tax rate in the Midwest), real estate prices, and utility rates; 2) superior transportation infrastructure, including five major interstate connections, new airport terminal with significant cargo operations, the second largest Fed Ex hub in the nation, more than 100 trucking companies, five major rail lines, and three maritime ports; 3) available and well-trained work force with skills focused in life sciences, digital technology, advanced manufacturing, logistics, motor sports, and clean technology; 4) global appeal, with large foreign direct investment as evidenced by more than 500 foreign companies in the state; and 5) excellent higher education and cultural institutions, including Indiana University-Purdue University Indianapolis, Butler University, University of Indianapolis, and Ivy Tech Community College, amateur and professional sports teams, museums, zoo, and many public parks.

Finally, as the figure below illustrates, employment growth for Indianapolis has done well relative to the Seventh District as a whole. Both before and after the Great Recession, Indianapolis has shown more robust employment gains than has been the case for the District.

Figure 1. Employment Growth: Indianapolis and Seventh District (% Change Yr/Yr)

Employment Growth: Indianapolis and Seventh District
Source: BLS and Haver Analytics

Footnotes

1 The U.S. Bureau of Labor Statistics (BLS) defines LQs as “ratios that allow an area’s distribution of employment by industry to be compared to a reference or base area’s distribution”.

2 Available online.

The views expressed in this post are our own and do not reflect those of the Federal Reserve Bank of Chicago or the Federal Reserve System.

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