Thursday, June 18, 2009

Rational Choice Migration

There's a big difference between understanding why people relocate and modeling migration. Spatial variance of unemployment rates is a good predictor of an overall pattern: Moving from a region of lower economic opportunity to a place with greener grass. However, this powerful lens of understanding is often misapplied:

Somewhere in [the rationale for NCR's move from Dayton, OH to Atlanta, GA] lies the truth. Or part of it. The full article digs deeper and identifies the direct international flights that go direct to and fro Atlanta. From Dayton, it's 60-90 minutes just to get to one of the regional hubs in Columbus or Cincy. But I wonder.

The article makes no mention of taxes, so I turned to the handy-dandy Tax Foundation's 2009 State Business Tax Climate Index. So guess which state is ranked 47th out of 50? And guess which state is ranked 27th? Nothing to see here, folks. Move along.

Indeed. Nothing to see here, save a sloppy analysis of a corporate headquarters migration. I would expect something like this from the Allegheny Institute. But the Kauffman Foundation? The post stinks of an ideological agenda. When looking for a root cause, see tax rates.

I can play the same game. While Ohio is indeed ranked 47th for taxes, it is also ranked 5th for "big business attractiveness and infrastructure based on number of Fortune 500 companies". Georgia is ranked 12th. Now I need to end my post with a snarky comment that demonstrates the superiority of my perspective.

The blogger claims that "the article makes no mention of taxes". Actually, it does:

The move means of the loss of Dayton’s sole Fortune 500 corporate headquarters.

Georgia put up more than $60 million in tax breaks and other incentives to lure NCR.

A last-ditch $31.1 million offer by Ohio’s governor to keep the company in Dayton fell short of Georgia’s bid, an NCR official said.

Gee, one would think that lower tax rates in Georgia would be enough. What gives?


Father Junto said...

great post. good points.

also, Kaufmann stuff is pretty hit or miss in general. What they produce under their name lacks a consistency of quality, which is disappointing.

Anonymous said...

Rankings...Here in Texas we like to talk about the magnet effect of not having an income tax. I don't disagree that it has an impact--much like incentives do play a role in location decisions--but it's very rarely the deciding factor on any major investment. It's just an easy story to tell.