The Very Smart Edward Glaeser on New York City:
Edward L. Glaeser (2005), "Urban Colossus: Why is New York America's Largest City?" (Cambridge: NBER Working Paper 11398).
Abstract: New York has been remarkably successful relative to any other large city outside of the sunbelt and it remains the nation's premier metropolis. What accounts for New York's rise and continuing success? 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.
...the distribution of employment in Manhattan in 2002. 28 percent of the payroll of the city is in a single three digit industry: "security, commodity contracts and like activity." This level of concentration is higher even than the commitment of the city to the garment trade during the height of that industry. Another 28.5 percent of total payroll is in three other industries: business, scientific and services (mostly lawyers and accountants), credit intermediation and company management. Together, these four industries account for 56.6 percent of total payroll in the isle of Manhattan. When Benjamin Chinitz (1961) compared agglomeration in New York and Pittsburgh, he emphasized the remarkably diverse nature of the New York economy. This is no longer the case. Manhattan employment is remarkably depended on finance, business management and business services.
This is not true in the outlying boroughs that are primarily in non-traded service sectors... health care, for example... these are both much smaller economic areas and are much more oriented towards providing services towards the residents of the greater New York area.
New York’s move into finance and management is not really paralleled by any of the other older cities. Perhaps the closest parallel to New York is Chicago which, during the last decade, has somewhat remade itself around business services. Boston’s post-1980 renaissance is completely different and should be seen as the result of small scale entrepreneurship in a number of disparate, high human capital sectors. The other large cities are still in decline and cannot be said to have found any meaningful replacement for the manufacturing firms that once employed thousands of their citizens.
The success of New York as a financial city suggests three questions. How did New York become the financial capital of the world? Why has New York’s dominance managed to expand in the modern era? Will New York manage to continue to survive on the basis of its financial industries?...