The physical shape of a county's connection to its neighbors is the most accurate predictor of how many jobs it will lose in a recession.
A geometric measure called the Industrial Curvature Index uses graph theory to map how different regional economies are linked. This curvature of industrial relationships determines whether a local economy is resilient or vulnerable during a financial crash. Economic planners usually look at employment rates or industry types to judge a region's health. This discovery suggests that the mathematical structure of a network is more important than the individual parts. Understanding the shape of a network could allow for better protection against future economic shocks.
The Industrial Curvature Index
SSRN · 6700358
<p>I introduce the Industrial Curvature Index (ICI), a geometric measure of how distinctive a county’s industrial composition is from that of its geographic neighbors. ICI is constructed by representing each county-quarter as a point on the simplex of NAICS supersector employment shares, equipping the simplex with the Fisher–Rao information metric, and computing time-averaged Ollivier–Ricci curvature on the Census-defined county adjacency graph. High ICI corresponds to counties embedded in tight