Industry Clusters and Employment Outcomes in Washington State

A widely used practice in state and local economic and workforce development is to identify and explicitly invest in strategic industry clusters. Economic theory suggests that industry clusters, defined as geographically concentrated groups of firms and supporting institutions in related industries, enhance industry productivity and regional prosperity, relative to nonclustered industries. This concept, although widely used, has been insufficiently evaluated. In particular, questions remain about the extent to which cluster strategies are associated with beneficial outcomes for employees in clustered industries. Using a population-wide panel of individual-level quarterly wage and industry data covering the period 2003-2010 for the state of Washington, this research measures the association of industry cluster membership with the employment status, wage levels, and wage growth rates of individual employees in counties in the state. The mixed results carry implications for strategic investments and job creation efforts by states and local governments across the United States.