The Financial Services Cluster of the Twin Cities Microeconomics of Competitiveness: Firms, Clusters and Economic Development

Abstract

The Twin Cities financial services cluster is an important regional financial center, and ranked eighth in the country among U.S. metropolitan areas in financial services employment in 2008. On the national level, New York and Chicago maintain a durable advantage as the nation’s top financial centers due to their stock exchanges and agglomeration economies that have developed due to their historical prominence in the industry. Although not employing as many financial services workers as the largest metropolitan areas, the state of Connecticut’s financial services industry has recently emerged as a leader due to its close proximity to traditional financial centers and an effort to offer lower costs and a better quality of life. The Twin Cities ’ competitive advantage rests in its highly educated population and high quality of life, which has led to the development and retention of a large number of Fortune 500 and Fortune 1,000 companies and results in the need for a sophisticated financial services industry. Twin Cities ’ depository institutions and securities brokerages may not have large job creation potential due to the local and regional nature of the demand for their services. In contrast, the insurance subcluster has a much greater opportunity for employment growth because it exports its products across the country. Minnesota’s strong concentration of health insurance carriers