ABSTRACTThis paper investigates the locational factors that contributed to the decline of the New York urban region's industries during 1972‐1975. Based on the static concept of a specialization index, a dynamic comparative advantage index is constructed. A model is then formulated to test the hypothesis that regional competitive advantage (vis‐à‐vis the nation) is a function of relative disparities in the change of these locational factors. Regression results show that the region's competitive advantage is influenced positively by the differential rate of change in market size, by the differential profit rate before tax, and negatively by the differential rate of change in unit labor cost and in unit energy cost. The differential tax rate does not seem to affect the region's competitive advantage. Nevertheless, a progressive corporate income tax structure tends to neutralize the beneficial effects of the economies of agglomeration and the urban attraction of the